Brexit: Energy Security (European Union Committee Report)

Baroness Featherstone Excerpts

Wednesday 6th June 2018 Lords Chamber

[Baroness Featherstone (LD)]

My Lords, we have had an excellent debate and I congratulate my noble friend Lord Teverson and the EU sub-committee on this excellent report on the energy security ramifications of leaving the EU. Our status as a full member of the EU has, up to now, ensured our energy security, efficient trading and a focus on energy efficiency while, as mentioned by the noble Lord, Lord Krebs, also ensuring a continued advance on decarbonisation. A number of your Lordships across the House—I think it was the noble Lords, Lord Selkirk of Douglas and Lord Krebs, and my noble friend Lady Sheehan—referred to the Commons Minister himself admitting to the committee that we will have to remain as near as possible to current arrangements. He is probably sorry that he said this. That particular sentence, I guess, highlights the complete folly of this. We seem to be cutting off our nose to spite our face in this fool’s rush to be free of the EU.

This excellent report demonstrates in every sphere the necessity of replicating or continuing each and every area of our energy relationship with the EU. Almost all of your Lordships who have spoken raised the necessity of remaining in or having an exact replica of our membership of the internal energy market, whose creation we led on. If we are to keep energy costs down, we will need to remain in it if and when we are outside. The Government are incredibly fond of referring to energy prices, so perhaps they should take notice of themselves. Perhaps the Minister can tell us in his response how we are to avoid the imposition of broader EU energy policy if we no longer have any voice in its creations but are mere supplicants to the table. Switzerland was highlighted as an example of how bad it gets.

A number of your Lordships raised the challenges and dangers of leaving Euratom, which was debated at length during the passage of the Nuclear Safeguards Bill, and where across the House we fought tooth and nail for the amendment that eventually came forward from the Government during ping-pong. It gives us an insurance policy so that if everything that should be in place by March 2019 is not, there is that fallback position.

A number of your Lordships also raised the issue around interconnectors. What do the Government believe will happen when these circumstances arise? At the moment my understanding is that, as a country, you get priority according to your need in the direction of energy flow. We have benefited from that to date but it will no longer be the case if we are not in the club. Club members will be served first.

We cannot presently meet our own heat and power requirements. I would obviously argue with the Government that we could if they really supported renewables, actually did something about energy efficiency, invested in renewable heat and supported innovation to scale. The noble Lord, Lord Rooker, certainly made clear his view of the Government’s response and, having read it, I was pretty much in agreement with his view. It is apparent from that response that the Government are relying to an extent on shale gas to answer their prayers. I can see the attraction of having the problem of the energy gap filled by private money coming in. It leaves the Government only to break all their promises and remove planning protections for local people, as if shale is some sort of economic miracle that will rescue us from the gas gap.

The Government look to the American experience to be replicated. Outside the recent report showing the new scientific evidence on the danger of fracking in ex-mining areas, I point out to the Government that our geology and geography is very different from America’s. Even if it were feasible to produce shale gas at scale, the economic miracle is fading. Asset life is critical, and the outlook is poor. In the USA, shareholders are now experiencing the reality rather than the promise of shale. A company such as Cuadrilla, which is looking for shale in Lancashire right now, has seen its shares fall to a quarter of what they were worth in 2009. That bubble is bursting. Shale is proving difficult in this country. The Government’s answer to the challenge of giving local people their right to protest is to change these applications to permitted development, and that from a Government who promised local people the final say. The shale bandwagon has passed. This is not the time to climb on it. This is the time to say yes to tidal lagoons, to invest in renewables and to take innovation to scale.

As the noble Lord, Lord Krebs, neatly highlighted, the Government’s answer to many things is the clean growth strategy and the industrial strategy. They form the stock answer to all questions on the future of energy security, but I find no security in them. They are full of ambition, but they are also full of words rather than actions. Actions speak louder than words, and we have seen many a time that the Government’s actions are going in the wrong direction. The Minister will be relieved that I shall not rehearse all the measures this Government have removed or have taken that have damaged our green credentials, which include removing the zero-carbon homes standard and the precipitate removal of subsidy that devastated many in the solar industry. The even more serious part of that is that the consequent undermining of investor confidence—if we Brexit, we will need investor confidence —is real and tangible in the investment community. Thank goodness we have pioneers pushing the boundaries.

This brings me to the last issue I want to address, which is the loss of EU investment in so many projects and areas in this field: the European energy programme for recovery, the connecting Europe facility, Horizon 2020 and the European Investment Bank, which many noble Lords raised. Perhaps when he replies the Minister will say how EU funding worth billions, which we will lose on our exit from the EU, will be replaced.

I will finish on the island of Ireland. I heard no solutions for it, and I look forward to the Minister giving us such a solution.

Domestic Gas and Electricity (Tariff Cap) Bill

Baroness Featherstone Excerpts

2nd reading (Hansard): House of Lords
Tuesday 22nd May 2018 Lords Chamber

[Baroness Featherstone (LD)]

My Lords, I thank all noble Lords for their contributions, even the noble Viscount, Lord Ridley, although I fear he and I will never agree on certain matters. A cap should never have been necessary and would not have been necessary if the big six were not greedy and if the regulator had used his teeth. It is, as the noble Lord, Lord Lennie, said, a measure of their market failure that we are in this position. The cap must be only a temporary measure, because it will not create the competition that is needed to really drive down prices. We have seen the success of offshore wind auctions not only in bringing down the price of offshore wind but in forcing other energy providers to compete. I could hardly believe it when EDF came to me to discuss nuclear and said that it would be able to compete with offshore wind. Competition works.

A cap must beware of unintended consequences, as several noble Lords have said. A cap can precipitate rises before its institution and after its departure, and we have already seen this with E.ON, I think, raising its prices. I tweeted my dissatisfaction at this event and E.ON tweeted back to say that it was because of rising costs. The next week, I saw what had risen: its profits, by 41%. So forgive me if I have no time for suppliers which wring their hands and say that a cap is not the answer. It should not be, and I wish it was not, but it is the only short-term answer to protect the loyal and the vulnerable. Competition is the answer.

As many noble Lords have mentioned, we have seen a rise in switching—this year, something like 5.5 million people have switched. However, that is nowhere near the level of competition that we need. The Bill states that it seeks to protect switching, and we must do that, particularly during the period when the cap is in place. To quote the Secretary of State:

“There should still be an advantage in shopping around, but customers should be protected from an ever-increasing differential that particularly penalises those who are vulnerable”.—[Official Report, Commons, 6/3/18; col. 207.]


As I mentioned, the big suppliers have lost our trust—definitely my trust—and they may try to find ways to stop their customers shopping around. Therefore, we on these Benches are not satisfied with the words of the Secretary of State. Ongoing benefit from switching needs active protection in the legislation.

It is not beyond the pale to imagine that, when the big six write to their customers to introduce what they are doing about the cap measures, they may fail to tell their customers that they can still switch and that the cap does not mean that their customers might not find a better deal elsewhere. For example, uSwitch wants Ofgem to make sure that suppliers cannot use misleading names for their capped tariff. If, when writing to their customers, suppliers were to use a name such as a “safeguard tariff”, that might make customers think that they are safe with that tariff. Therefore, uSwitch is suggesting that Ofgem should consider and test names for the cap—something like “temporary tariff”—to find out consumer response. We need to be sure that consumers will not be misled by their supplier’s anxiety to keep them by marketing ploys.

It also highlights a concern that, if and when the price cap is changed during the period, which might be the case, we will need to make sure that suppliers do not minimise consumers’ responses to such changes. Notification letters must make it clear that the price cap does not necessarily or automatically deliver the best deal and that customers may still find a better deal if they shop around, or not.

Lastly, the information on switching should be easy and accessible in all communications. I will probably bring forward an amendment mandating guidance as to what such correspondence must say about the cap. That must be universal to all suppliers so that it is the customer who is given straight facts and the supplier does not omit the facts for commercial purposes.

Some noble Lords have raised the point—not always in a good way—that one of the most disappointing parts of the Bill is the omission of the exemption for green energy tariffs. It is not only disappointing but unacceptable. The Government promised that they would seek an exemption for green energy tariffs and when they accepted a recommendation from the Select Committee I had some hope that they meant it. I understood the proviso they put forward that any tariffs exempted from the price cap on this basis would only be agreed to when Ofgem was satisfied as to its credentials in directly supporting the production of renewable energy. That is completely fair—but I do not see it in the Bill. The Government should stop pretending that they support the green agenda—they do not. They are happy to remove planning protections for local people fighting fracking—as mentioned by the noble Viscount, Lord Ridley—they are happy to pay squillions for nuclear, they broke their promise on carbon capture and storage, they are doing nothing to deliver green gas, they have zero hope of reaching their existing targets and they have done nothing but undermine renewables.

Claire Perry, the Minister, who was by the Throne earlier, is asking the climate change committee to look at zero carbon 2050, no doubt spurred on by my report on zero carbon 2050, A Vision for Britain: Clean, Green and Carbon Free. The Government are about sounding green, not doing green. The original draft of the Bill included an exemption from the proposed cap for green electricity tariffs with an additional environmental benefit. In the event, the Bill only puts an obligation on Ofgem to consult on an exemption for tariffs supporting the production of gas or the generation of electricity from renewable sources. However, the cap may be introduced before that consultation is complete, let alone the exemption made. Firms such as Ecotricity and others which are doing the right thing and changing our world for the better—pioneers taking us forward—need to be supported and encouraged, not undermined by a Government who talk green but act blue. We on these Benches want to see that exemption in the Bill and I will table an amendment to that effect.

On the issue of vulnerable people, which has been raised by other noble Lords, it is proven that people with disabilities face higher energy costs. It is therefore right and necessary for the Government to tackle this with a temporary cap on standard variable and default tariffs. Scope issued a briefing highlighting the concerns for the most vulnerable. There is an issue for those on an Ofgem safeguard tariff, who could see their costs rise as a result of the cap. Those on the safeguard tariff, prepayment meters and warm home discounts are exempt from the cap.

Scope is concerned that the new extended safeguard tariff planned by Ofgem, which will be replaced by the Government cap on standard variable and default tariffs, may mean in effect that some consumers with disabilities miss out on support because they may not be on a variable or default tariff. Scope believes it is vital that the Government make Ofgem identify those in receipt of the safeguard tariff and put in place measures to offset potential loss or, alternatively, not proceed with removing the safeguard tariff. The Government must ensure—no, they must guarantee—in this Bill that no one with disabilities will be made worse off by this or future changes in the cap/tariffs. I will table an amendment to establish that principle in law in due course.

Scope says that the price cap will go some way to protect disabled consumers with high energy bills but it is not sufficient to tackle the range of barriers that customers face. Its proposals are around improving support for disabled energy consumers, more effective data capture and sharing, accessible communication and digital inclusion. It asks the Government to put in place a longer term plan to address those barriers alongside the price cap. This should be a must for the Government. It is not good enough to take half measures to create equality—they have to deliver. This is an opportunity for the Government to apply the principles of the DDA and the Equality Act promptly and without equivocation.

There is a clear failure to protect in the Bill as currently drafted and I trust and hope that, following amendments that will be brought forward in Committee, the Government will move on this issue. If they do not accept the amendments brought forward in Committee or on Report, I hope they will bring forward amendments to achieve the ends I have outlined in ensuring that the most vulnerable are securely protected.

I turn briefly to appeals, a subject that has been raised by many noble Lords. A large lobby of suppliers want the Government to introduce an appeal to the CMA on how and what Ofgem sets as the cap given that currently only judicial review is available. SSE is particularly concerned that the way in which Ofgem sets the cap should reflect the cost of supplying energy. It suggests that the bottom-up cost assessment approach would be the fairest one and carry the lowest risk, and it too subscribes to the right to appeal. I tend to pay heed to the words of the noble and learned Lord, Lord Mackay, who has made a strong case on this, and I will listen to the Government’s view on an appeal process. We do not want to introduce any delay, but as other noble Lords have mentioned, apparently there is no delay as the result of an appeal. Perhaps the noble Lord, Lord Henley, can answer this question in his response. Why should the normal process of appeal to the CMA have been omitted in this case?

Lastly, one of the key issues is what is to happen next? What will happen when the cap ends? What are the conditions under which it could be lifted? Surely the Government should set those parameters, given that this is after all a temporary measure. What would have to happen for the cap to be lifted and what is in place to ensure that the big six cannot repeat the sorry situation which has necessitated the cap in the first place?

Before I conclude, I want to reiterate a point made by my noble friend Lord Teverson on energy efficiency. A great deal of consumers’ money literally goes out of the window or through the gap under the door. Given that, it would be significant if the Government could consider making energy efficiency a national priority as part of their infrastructure plans. However, as noble Lords may have gathered from what I have said, while we on these Benches support the cap, we want to see some movement on the issues that I and other speakers have raised.

[Lord Henley]

My Lords, I am grateful to the noble Baroness for her intervention, and for what I think is the first authoritative statement from the Liberal Democrats in the course of this Bill through both Houses. I take note of her concerns about the Bill; she has made it quite clear that the cap should never have been necessary. However, as I understood by the end of her speech, she seems to think it right to put the cap in place. No doubt we will hear more from the Liberal Democrats, as I hope we will from other noble Lords, when the Bill is considered in Committee. It is possible that we will have rather a busy Committee stage because a number of concerns have been raised. I hope to be able briefly to address just some of them in my remarks winding up the debate. It probably falls to the noble Lords, Lord Stevenson and Lord Teverson, who have in effect provided me with a template for a number of questions to address in the brief time I have. However, other noble Lords, including my noble and learned friend Lord Mackay, have made it clear that we will have to devote considerably more time to the issue of the appeals process. As I say, I hope I will be able to touch on some of those points, but obviously we will leave the detailed discussion until Committee.

That brings me to another point that needs to be raised at this stage which has been touched on by a number of noble Lords, including the noble Lord, Lord Stevenson: the very important question of timing. If we are all in favour of a cap, and I am still not quite sure what the official Liberal Democrat position is on that, we must ensure that it will be of benefit to as many consumers—

[Baroness Featherstone]

I should make it clear to the Minister that we support the cap.

[Lord Henley]

I am grateful to the noble Baroness for making clear the Liberal Democrat policy on this, but she did start by saying that the cap should never have been necessary and that she did not like it. However, she then stated that she wanted the cap introduced. I want to make sure that we have it in place, and that is why I must go back to the timing. While I cannot guarantee that we will have it in place by the time the clocks change, we hope to have it by the winter. For that reason, perhaps I may remind noble Lords that it would be helpful if we could deal with the Bill and see it returned from the Commons with all the concerns having been dealt with in one way or another by the time we take up our buckets and spades at the end of term. I do not know what it is that noble Lords do in the holiday months. We should get the Bill on to the statute book with Royal Assent so that the processes can continue and, by the end of the year, we will have a cap that offers benefit to consumers. If the Motion that I shall move at the end of the debate is agreed, I look forward to a constructive Committee stage in the Moses Room so that we can go through these matters and then sort them out on Report. I hope noble Lords will bear in mind what I said about timing at this stage.

As I said, the noble Lords, Lord Stevenson and Lord Teverson, set out a template for a number of points that I want to deal with: vulnerable consumers, the absolute versus the relative, conditions for effective competition, the cost of an energy review and green tariffs—other noble Lords covered all these points so I hope that they will not mind if I do not pause to mention every name—as well as some of the network costs, the timing of the Bill, which I just have dealt with so I can cross that out, appeals and, finally, the cost of environmental levies, as mentioned by my noble friend Lord Ridley. I will refer to some of those at the end.

For now, I will run through some of those points; it might save a little time in Committee but I doubt it. I also want to say how grateful I was to my noble friend Lady Bloomfield for reminding us that bringing forward a Bill of this sort was very unusual for a Conservative Government, as I tried to make clear at the beginning of the debate. We believe, as she cited, that there are occasions where markets are not working and it is necessary to intervene. That is what we are doing; we are intervening temporarily. These are not rent controls. This is not about bringing back a prices and incomes commission. It is a temporary measure to deal with the current problem of markets not working. In time, we hope to be able to return to what I sensed the noble Baroness, Lady Featherstone, wanted to take the Liberal party back to—a glorious, 19th-century free market approach—although she reverted to something different later on. We will get there in the end and I look forward to that joyous Committee stage.

I begin with the crucial point about appeals made by my noble and learned friend Lord Mackay, my noble friend Lord Hunt—an eminent lawyer whom I have served under—and other eminent lawyers whose tongues I have borne the sting of, such as the noble Lord, Lord Carlile, and the noble Lord, Lord Redesdale. Obviously, we will debate this issue in much greater detail in Committee; as noble Lords know, it was raised in another place and considered by the Select Committee. We should all be grateful for the work done by that committee on the Bill and for our process of sending draft Bills to Select Committees or other committees. Having considered this issue, the committee concluded that,

“judicial review is a common and satisfactory appeal route for energy decisions, even highly technical ones”.

The Government hope that energy suppliers will focus on engaging with the regulator’s consultations on the design of the price cap, rather than the scope for appeals and legal challenges. I appreciate that noble Lords who spoke on this think otherwise. They think that an appeal to the CMA would be less burdensome than using judicial review. We can reflect on that and we will consider it, but I note what Members have to say at this stage. I think we will have considerable discussion on it in Committee.

Concerns about vulnerable consumers were raised by the noble Lord, Lord Carlile, the noble Baroness, Lady Featherstone, and others such as the noble Lord, Lord Whitty. Again, additional protections for vulnerable customers and the interaction of the cap with Ofgem’s existing safeguard tariff will be a matter for the regulator. The Bill provides for Ofgem to maintain a cap for vulnerable consumers that is separate from the prepayment meter cap imposed by the CMA. In addition to the duty imposed on Ofgem by Clause 1(6) to protect all existing and future domestic customers on standard variable tariffs, the Gas and Electricity Acts impose duties to protect the interests of customers. In carrying out this duty, Ofgem should have regard to all the points that noble Lords have raised. The noble Baroness mentioned the document produced by Scope, which I have seen. Obviously, Ofgem should take into account the interests of individuals who are disabled, chronically sick, of pensionable age—as the noble Baroness, Lady Featherstone, pointed out, there are many of that last group in this House—with low incomes or residing in rural areas and others. Again, these are matters that we can consider later.

The subject of the absolute versus the relative cap was raised by the noble Lords, Lord Stevenson and Lord Teverson. This matter was discussed at considerable length in another place; quite often, one needs a cold towel wrapped around one’s head to understand some of the technicalities. Again, it is a process that we will consider in great detail. The Government, Ofgem, the Select Committee and another place all believe that what we are doing is the right way to proceed. A relative cap might simply prompt the withdrawal of more competitive rates by larger companies while offering no protection to those on poorer-value tariffs. We will look again at this in greater detail but, on some occasions, I think noble Lords will find these matters difficult.

The noble Lord, Lord Stevenson, talked about the conditions we need for effective competition—it was the third point he raised. The legislation is framed so that consumers’ incentives to switch, which is what we want, and suppliers’ incentives to compete are maintained. I appreciate that the noble Lord, Lord Carlile, in his usual amusing way, pointed out how difficult it can sometimes be when we sit down with our computers and have all these messages appearing. We want to make it easier; we will try to do that. That is one reason why we hope that the cap will be just a temporary measure which is removed when the conditions for effective competition are in place. We have not provided in the Bill for what those conditions will be, as in a changing market we do not want to impose conditions that may not be met or tie the removal of the cap to measures that will not be in place by the time that the wider market has become competitive. It will be for Ofgem to report on whether those conditions are met, and the Secretary of State will then make that decision on removal or extension. Clause 8 makes provision for that to happen repeatedly over the years if we seek an extension.

The fourth point raised by the noble Lord was the Cost of Energy Review. We are aware of Dieter Helm’s comprehensive and fully independent review of the cost of energy: I think it arrived very soon after I became a Minister and it was probably the noble Lord who put down a question very soon after that, which I had to respond to despite the fact that the review was some 158 pages. I had to assure him, or someone, that I had not read the entire review in the time available, which was about four days. I have had more time. I cannot claim to have read it absolutely from beginning to end, but we are still considering those findings and we will in due course set out our next steps in light of the responses we have had from others to it.

The Government have already taken action that has helped reduce costs and helped consumers to manage their bills. The cost of offshore wind, as noble Lords will know, has halved over the last two years. We have paid compensation to eligible businesses in energy-intensive industries across the UK for the indirect costs of energy policies: that has totalled well over £500 million since August 2013. We are also seeking to do more by upgrading something like a million homes to meet our obligations to make them more efficient. The costs of those policies to deliver clean growth on bills are more than offset by savings from improvements in energy efficiency, saving on average in 2016 something of the order of £14 on household bills.

The noble Lord, Lord Stevenson, and others raised green tariffs. The Bill places a duty on Ofgem to consult on exemptions to the cap for green tariffs. I note in passing that while the noble Lord, Lord Redesdale, is perfectly happy to pay more, that will not be the case for everyone; but we leave that to him. Green tariffs are tariffs that support the production of gas or the generation of electricity from renewable sources.

Smart Meters Bill

Baroness Featherstone Excerpts

Report stage (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, the Bill is a largely technical Bill, introducing three elements, namely: extending the Government’s powers; introducing a special administration regime for the national smart meter communication and data service provider, the DCC; and providing powers for Ofgem to deliver half-hourly settlement using smart metering data. By and large, these elements have been critically examined in the other place, as well as in your Lordships’ House. We do not particularly take issue with these measures but we recognise that Ofgem’s monitoring and powers over pricing should enable adjustments to make the possibility of a special administration regime extremely unlikely. It is fair to say that we remain concerned that consumers could ultimately pay the price either way.

However, on the analysis of the present circumstances in the rollout of smart metering, the programme is to a large extent in disarray, with enormous confusion and uncertainty in the marketplace. This inevitably leads to reticence and a lack of confidence in the mind of the consumer. We continue to highlight this in our Amendment 1 today. The technical nature of the Bill belies its national importance; it deals with critical national infrastructure, whose modernisation is crucial. We agree with the Minister that the large-scale rollout of smart meters across the UK by 2020 is a substantial technical, logistical and organisational challenge. Everyone is clear that meeting that challenge depends on collective and co-ordinated delivery. In Committee and in subsequent discussions, the Minister has been emphatic that the programme should be led by government. We have therefore altered our amendment and recognised that Ofgem has a different role to play.

The amendment puts the challenge to the Government to provide the leadership. We still believe that a national plan is required. The Government may challenge our diagnosis and claim that they have a high-level plan. However, the perception in the marketplace is very different. The mixed message—on the one hand that the consumer needs only to be offered a smart meter while, on the other, that smart meters need to be installed to a rollout target programme—has not been helpful. We need technical difficulties to be resolved, solutions to be promoted and accountability to be put into the hands of government to make this infrastructure upgrade the success that it needs to be.

The main elements of the amendment remain from our Committee discussions. The Government must galvanise the situation and be seen to be guiding the process: taking ownership of the issues, building ambition into the programme to deliver benefits and putting the consumer in control of their energy use, so that they become more informed and efficient and save themselves money. We have also put a check into the process by the addition of a subsection in our proposed new clause such that should fewer than 500,000 SMETS 2 meters be installed by the end of the year, a review and reassessment must take place. The challenge of careful management is herein included.

Energy efficiency is a crucial element of enabling the UK to meet its energy demands. The achievement of this must be put into the hands of consumers, through the transformation that smart meters will bring to their lives. A smarter, sensor-enabled network would be able to assess live power demand and current usage, transferring power from place to place as needed, reallocating or postponing charging times automatically and potentially allowing the UK to identify the ultimate source of the power through a modern, decarbonised energy mix.

Electrification is still essential to meeting long-term emission targets. It is clear that upgrades to the power network through renewables, storage and additional investment in household-to-grid infrastructure are all crucial elements. This amendment will bring visibility to the process and place responsibility in the hands of the Government. I beg to move.

[Baroness Featherstone (LD)]

My Lords, I support this proposed new clause on the national plan for smart metering, to which I have added my name. As I said in Committee, I came to the smart meter table relatively late, far more recently than most of your Lordships, who seem to have been debating it in one form or another for some years. I was shocked at the seemingly piecemeal way it has evolved, as if it were not one of the major infrastructure projects of this century, which it is. As a consequence of this approach, I have seen a lack of vision, scale and form, which is why this project has been so poorly executed. I was astounded to find that the suppliers were to be the agents of change; I did not understand why it was not the distributors.

However, we are where we are, as they say, so this new clause is proposed to give the opportunity for the rest of the scheme to be conducted in a far more responsible and farsighted way. It would allow the Government and all the players to ensure the best way forward and to deliver certainty and security for consumers, who have been expected to change—we know how difficult change is—but then have heard conflicting and different advice at different times from different people.

The proposed new clause would make sure that all parties are involved; it puts in metrics, targets and incentives to maximise take-up. It makes tracking progress on those tasked with delivering the objectives of smart meters and details what that will require. It would make sure that everything is properly reported, measured and documented. At last, we might actually have a critical path and a critical path analysis from which to work.

The proposed new clause would put this massive civil infrastructure project on a certain basis; it provides certainty for the consumer and a more sure and stable critical path for providers and all those participating in the rollout and beyond. As the noble Lord, Lord Grantchester, said, that is central to all our commitments on energy and energy efficiency in the future.

I very much hope that the Government will take a deep breath and graciously accept that they need help, and that the national plan would be a sensible and professional way forward.

[Lord Teverson (LD)]

My Lords, I support Amendment 1 in the names of the noble Lord, Lord Grantchester, and my noble friend Lady Featherstone, and I should also like to speak to my Amendment 2.

It is important to remind the House that this is an £11 billion programme; it is one of our major national infrastructure programmes, started in concept when I joined the House in 2006. It is now 2018—12 years later—and all of 300 meters have been installed, but we are not sure whether they work. There are another 10,000 which do not comply with the final regulations that we are trying to achieve—that is another potential problem for the future.

The one person I have really missed in this debate is Lord Patrick Jenkin on the Government Benches. He was one of the great analysts who brought together the real facts of a case, and we miss his presence.

One concern I had in Committee was prompted by my noble friend Lady Featherstone, who spoke very cogently of how, when the congestion scheme in London was rolled out, huge testing was carried out to make sure that the system worked when it was launched and that it was effective from day one. Yet when I asked the Government about their tests for SMETS 2 meters and their systems to ensure that the machines were ready for the massive rollout of 50 million meters by 2020—it is almost amusing to say that date—I got no response. The Minister looked at me as if to say, “What are you talking about?” It seems that there is no bar that has to be crossed—there is no test before we roll out these additional 40 million meters, supposedly over the next couple of years.

Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Baroness Featherstone Excerpts

Wednesday 9th May 2018 Grand Committee

One thing I had not realised, which came out in the sub-committee I chair, is that the renewable heat incentive scheme is part of an agreement on the proceeds of the EU Emissions Trading Scheme. Some of that, in a sort of hypothecation, has to be ploughed back into certain energy schemes, and I understand the RHI is part of that contract. I wonder whether that, and the Government’s views about the RHI, will change once we are out of the EU—although I understand from Minister Claire Perry that we are going to remain in the EU ETS during the transition period. However, I would like to understand whether that affects the long-term funding of the scheme—which of course is funded by taxpayers, as opposed to the electricity schemes, which are funded through consumer bills.

[Baroness Featherstone (LD)]

The delay to the laying of these regulations has been hard for the industry. We will not stand in their way; however, perfect they are not.

I am sure the Minister will understand the need to keep a watch on their effect as they come into being as there may be unintended consequences—some of which I shall run through. I seek the Minister’s assurance that the Government will keep them under review and make further changes and revisions where needed. I shall put forward a raft of suggestions in that vein.

One of the shocking aspects of the RHI is how far short of the expected targets it has fallen, as mentioned by my noble friend Lord Teverson. I was watching the Public Accounts Committee session on the RHI and was astonished at the BEIS response to questioning from the committee on the fact that the original target for number of installations was 513,000 by 2020 but, as was mentioned, only 78,000 had been installed by December 2017, as stated in the NAO report.

The BEIS response was even more shocking because it was that this meant we had saved money and that was a good thing. BEIS prayed in aid unsubsidised companies which were doing brilliantly. The Government would reach their targets for emissions reduction and renewable energy production anyway, so it did not matter. I thought that was a concerning approach to the desperate need to decarbonise heat.

The NAO report demonstrated that the ambition of the Government in this regard has been scaled down from their original ambition. The proportion of renewable heat that will not be eligible for RHI has gone up by 270% and the lifetime emission reduction resulting from the RHI has gone down by 44% compared to the original ambition. The Government are not on track at all to reach their fourth and fifth carbon budget targets, and they will be missed. We were all celebrating when we signed the Paris agreement, yet there has been no step change in actions to match the step change needed to meet our commitments, particularly on heat. In terms of our debate today, there is a cliff edge coming in 2021, so will the Minister say what is the Government’s plan? What is going to happen when the scheme ends? The Government have said that they will bring forward lots of studies this year and report on their review in the summer of 2018, which is nearly upon us. Can the Minister be explicit in his response and tell us what we can expect to see and when we can expect to see it?

As the Minister said, there has clearly been a lot of gaming to get subsidies that are not in the spirit of this agenda. Can he tell me how many companies have been caught gaming the system? In the committee, it seemed that most of the checking is done at the point of accreditation and there is relatively little in terms of inspection and audit. If we need regulations changed to clamp down on this, perhaps the Government should also be looking far more strictly at their compliance regime.

I want to address one of the changes in these regulations that have been brought in to address some of the gaming that was mentioned; the drying of wood. It is obviously not the intended purpose of the subsidy, and companies which game the system should be ashamed of themselves, but shame clearly is not working. I totally understand and support the Government’s desire to make changes that will exclude this type of gaming, which unfairly means that those who play by the book find themselves at an economic disadvantage, and margins are extremely tight.

However, there are potential unintended consequences of the new regulations about feedstock rules, and I should like the Minister to address this issue. The regulations in relation to AD rightly want to encourage the use of non-crop feedstock. That means that there will be a greater need for feedstock processes, such as pasteurisation or hydrolysis, to make sure that digestate is safe to lay across the land. It also means that a wider range of feedstock will be used. This is not my specialist subject, but removing potential bugs from the digestate, meeting the requirements of the Environment Agency and reassuring end users that the digestate is okay to spread to land seem pretty important.

As we rightly shift to non-crop feedstock, this will become a bigger issue and the need for these processes will increase, so companies doing the right thing may find themselves penalised economically for doing so under the new rules. Going forward, all RHI projects will use some waste feedstock, and the change to waste eligibility potentially rules out these uses. If the RHI subsidy is not allowed for plants using these processes, projects may be unable to go ahead. The original consultation referred only to withdrawing support from drying “industrial or municipal waste”, and it is a good move in these regulations to remove the ability to game in that way. Is it intended that the policy should also capture pasteurisation and/or hydrolysis in AD plants with the exclusion process for waste? If that is the Government’s intention, how will it work if only a proportion of the input feedstock is waste? Does it mean that even a tiny amount of waste feedstock would render all heat generated ineligible for support? Could the amount of support paid be adjusted based on the proportion of waste feedstock used?

There is a call from some in the industry for flexibility in the system, as there is a difference between AD projects that use heat for pasteurisation or hydrolysis as opposed to blow-drying wood. To indicate some of the financial implications, although each plant is different, this one is an example of potential financial implications on set-up. Funding projects with a current long-term investor requires returns of minimum 8.5%; it would need to be more like 9.5% to 10% on the open market. For an average plant, therefore, the overall cost to build is £12 million. The RHI heat income that would be lost if the changes are interpreted as “no RHI paid on heat for pasteurisation or hydrolysis if any waste is used” means that £880,000 would be lost over a project’s lifetime, taking 0.4% off the project’s returns. Given that these projects are only just achieving the required level, a project that is just about fundable now would not be funded as the return would fall to only just over 8%.

I know that is very detailed. I obviously want to give the Minister time to think about this, but these issues have been raised by the industry. The Minister is getting sympathetic looks from my noble friend on my right. My point is that this is detailed and close, but when margins are close, this is important. We want to encourage these people to set up new plants, not discourage them. This needs looking at and we need to keep an eye on it because it puts people out of business. As small as it seems, it is hugely important.

[Lord McNally (LD)]

I intervene to say that this matter illustrates the importance of these committees, where the industry and Members are able to put on record real concerns that both Ministers and the learned people behind them can take on board for the future.

[Baroness Featherstone]

I thank my noble friend.

[Lord Henley]

My Lords, I intervene just to say that I caught the noble Baroness’s noble friend’s eye and he was looking faintly sympathetic towards me. The noble Baroness is making some very valuable points, some of which I will be able to respond to. In relation to the point being made by the noble Lord, I will write to the noble Baroness in much greater detail and make the letter available in the Library, as she knows I always do.

[Baroness Featherstone]

I know that the Minister will always write to me. He writes to me often. I will leave that issue for him to ponder and, I hope, address in his response; I am happy to have in writing whatever he cannot address now.

I want to move on to other issues that need addressing or reviewing as soon as possible in the regulations. I thank Energy UK for drawing my attention to the assignment of rights, for which we are all grateful. Will the Government extend similar rights to small and medium-sized businesses and, if so, when? The changes to support household customers with high up-front costs are excellent, but small and medium businesses need a similar provision. The Secondary Legislation Scrutiny Committee report was clear that a comprehensive review of the RHI is needed and that BEIS needed to be,

“rigorous and ongoing if the deficiencies of the past are to be redressed”.

To be sure that money is being spent appropriately, this needs to happen before the end of 2018 to make sure that what is yet to be spent is spent efficiently. Moreover, it is extremely important to introduce a long-term low-carbon heat incentive going into the future, beyond the cliff edge.

The NAO pointed out the scheme’s failure to be cost-effective and essentially said that that was down to poor monitoring and targeting. Can the Minister tell us how the Government will address the NAO’s concerns in monitoring and ensuring the appropriate targeting of the RHI in future?

Energy UK has helpfully published a report that lays out a way forward for the industry, the Government and Ofgem in terms of actions and decisions needed in order to decarbonise heat. Given the gap between where we are and where we need to get to on decarbonising heat—I was going to go into fracking but I will spare the Minister that—I suggest that the Minister not only reads that report by Energy UK but acts on the very good advice that is in it.

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[Lord Henley]

I appreciate what the noble Lord says about there being no logic to it. It is just that there is no evidence at the moment that lack of access to loans is a barrier to business. If the noble Lord thinks otherwise and can produce evidence, it can be looked at.

As I said, the order has largely been welcomed, and I am very grateful for that. These changes are necessary as a result of the NAO report. I think that we would all agree that there have been considerable successes this year. It is only part of the whole scheme of trying to decarbonise the system—again, we wish to pursue that even further.

I want to pick up on one final comment from the noble Baroness, Lady Featherstone. If I could persuade her and some of her Liberal friends of the benefits of what she referred to as fracking and of pursuing greater domestic production of gas—of which there is potentially a great deal in this country—in that it improves both our chances of a degree of decarbonisation and our energy security, I would feel that I had achieved a very great thing. That will no doubt come in the future. In the meantime, I will give way before I finally put these regulations to bed.

[Baroness Featherstone]

Without going into a detailed back and forth discussion on fracking, I simply want to add to the point I made about the Paris agreement. Bringing on stream another fossil fuel at this point might be a distraction from a real solution to our problems in the future.

Smart Meters Bill

Baroness Featherstone Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 24th April 2018 Grand Committee

[Lord Grantchester (Lab)]

My Lords, I will speak also to Amendments 2 and 4 in this group. Amendment 1 gives the Secretary of State a further three years beyond the date the Government are asking for in the Bill. The Government seek to extend the existing powers provided to the Secretary of State to develop, amend and oversee regulations relating to the licensing of smart meters from 2018 to 2023. Unusual as it may seem, we would like the Government to have more time. We want them to get the smart meter implementation programme right.

We are all in favour of smart meters and the benefits that they will bring to energy efficiency and customer satisfaction. I could cheekily say that we do not want to have to grapple with whatever state of distress the smart metering programme has reached when we take over at the next general election. We want the plan to work for consumers, and at the moment we see a smart meter rollout that is unclear, incoherent and unco-ordinated in its approach. The Second Reading debate revealed the delays, complexities and escalating costs at this juncture. We want the Government to take more time. We think that they will need more time. Ostensibly, they are seeking the five-year extension—three years beyond the 2020 deadline—in order to conclude a review of the data access and privacy framework by the end of 2018, and to fulfil any actions needed from the review.

In addition, I understand that the National Audit Office review of the cost-benefit analysis, due in July, will also be delayed because of a lack of resources. The review was also going to consider the technological choices made to ensure that the programme was not going to be installing obsolete equipment. I would appreciate it if the Minister would include the latest position on the NAO report in his remarks. This indicates that there is going to be a pause in any case. We believe that this time should be used constructively. Experience has already shown that the timetable has slipped. We say to the Government, “Take more time. We think you might need it. And in return, let’s get it right. Let’s be more ambitious. Let’s capture the latest technology to bring real benefits to consumers”.

Also contained in the amendment is the consideration that the statutory obligation to complete the rollout by 2020 needs to be reassessed. First, there is a mixed message or misunderstanding about what is to be completed by 2020. I am grateful to the Minister for his letter of 22 March, after Second Reading. In his second paragraph, he writes:

“The obligation on energy suppliers … is to take all these steps to install smart meters … by the end of 2020”.


However, in the first paragraph of page 2 of the letter he writes:

“The Government is committed to ensuring all homes and small businesses are offered smart meters by the end of 2020”.


There is a lack of clarity between installation and being offered a smart meter by 2020.

The Government needs to reassess the whole programme, revisit the milestones and reset the parameters in a collaborative way with the various interested parties charged with making smart metering happen. Just as the Government need sufficient time to undertake and execute actions from the post-rollout review of the programme, as the Minister’s letter states, so the industry needs the confidence to implement worthwhile solutions for its consumers.

I move to Amendment 2, which was moved in the other place, and we repeat it here merely to retest under what circumstances the Secretary of State may wish to remove certain licensable activities to which his department has drawn attention in its memorandum, submitted to your Lordships’ Delegated Powers and Regulatory Reform Committee. Although it is stated that there is no intention to use this power, one licensable activity that could be removed is a revision of the smart meter communications service, the DCC. In line with the ambitions under Amendment 4, perhaps the Minister might clarify why his department may wish to use the power included here.

On Amendment 4, although the Minister and the Government may wish to portray that smart metering is now back on track and proceeding constructively towards its objectives, very few independent assessments concur with that view. There continues to be confusion regarding which types of SMETS 1 meters can be upgraded without replacement to be interoperable and from what date. There is confusion around differing standards and the use of differing technologies around the UK; confusion over whether pursuing the 2020 deadline has the potential to increase costs and risks and jeopardise the programme’s increasingly suspect credibility to consumers; and concern that a lack of fully tested SMETS 2 meter devices will further undermine meeting supposed timescales.

In considering the number of reports across the various parameters important to stakeholders, the necessary consumer activity required and the technological challenges inherent in these meters, we concluded that it would be far more constructive if all those intimately challenged by the rollout were to come together to share perspectives and work constructively together to find common solutions and co-ordinate the rollout. We consider that Ofgem as the industry’s regulator would be best placed to lead and develop this national plan. We consider that consumers should be put at the heart of the programme, costs monitored to secure benefits for them and the programme able to take advantage of all developing consumer technologies.

Proposed new subsection (3) clarifies those that Ofgem must consult, and subsection (4) specifies all the ambitions to which the national plan must have due regard. The plan must set out credible milestones with appropriate timescales for achievement, including the installation or termination date. The plan needs careful monitoring and adjustment, with frequent reports from Ofgem. For example, I draw attention under proposed new subsection (4)(g) that all other national rollouts of smart meters have been conducted through DNOs—distribution network operators—not suppliers. Here the rollout has been conducted by energy suppliers. I do not wish to challenge the whole implementation model, but it could be that different answers are required as implementation proceeds, and Ofgem needs to be able to take account of this and promote effective delivery mechanisms.

A reset needs to be made so that the consumer can begin to have confidence again that smart meters will be deliverable and beneficial. Smart metering needs to be the first crucial initial infrastructure in place to deliver the benefits of smart technologies to the home. It needs to be effective—it needs to be got right. I ask the Minister to respond positively to this amendment. It may not be correct in every detail: for example, it does not include a review of the cost-benefit analysis, as it had been understood that the NAO was already going to be doing this. The Minister needs to advise the Committee on the status of that review. It can be included on Report, should the NAO not conduct the review after all. However, I ask the Minister to agree that a national plan along these lines is required and to bring something back himself on Report. Perhaps this can be discussed next week, but a favourable response would be very constructive. I beg to move.

[Baroness Featherstone (LD)]

I support Amendment 4. Compared with other noble Lords present, I came late to the smart meters table. They have participated in a number of debates leading up to where we are now and during that process they have obviously met a number of bodies associated with the smart meters programme. I have to say that I have been somewhat shocked at how what should be an energy revolution, welcomed on all sides of this House and beyond, has turned into a shambolic mess. As was mentioned, the cost—much higher than was ever envisaged—will no doubt end up with the consumer. This could and should never have happened.

I was a member of the London Assembly when it was formed in 2000 and I was chair of the transport committee. When we introduced in London the biggest civil engineering project since the end of the Second World War—the congestion charge—a great deal of planning and work went into making sure that on the day it went live, it was so well thought through that nothing went wrong, despite the Daily Mail circling the perimeter of the charge to, it hoped, see it go wrong. I do not really understand why the commissioning of such a major infrastructure project has not been treated in that fashion. This is an absolutely huge change and an infrastructure priority, heralding a better future for all when energy is very important to this country. It seems to have involved a kind of piecemeal bun fight over which companies will deliver which meters to which people under what circumstances and for how long, with no co-ordination, no collaboration and nothing bringing it together.

Everyone has made it quite clear that the deadline will be missed. I am afraid that I have not met anyone, other than the Minister, who thinks that this deadline will be reached. That being the case, rather than move the programme to 2023 or whatever, it would be far better to grab hold of it now: otherwise, consumer confidence, which is vital to this project, will be completely undermined. I hope that the Government will grasp hold of this and take up the recommendation of the noble Lord, Lord Grantchester, coming back with a similar suggestion for halting the project and promoting a national plan. Not only does what needs to be done to whom, by whom and at what cost need to be thought through but there is a great need for a new communications programme to market the project. There is possibly also a need to incentivise consumers and to find a way not to put them off but to bring them back into the fold after they have become somewhat disillusioned.

The opportunity to make the project work is there, but at the moment we are in danger of the absolute opposite happening, with diminishing returns and diminishing confidence, shooting ourselves in the foot over what should be a fantastic programme for the future. The project has been piecemeal, inadequate and not thought through. If the Minister will excuse me, I believe that he should bring it together, do the necessary and bring back an amendment on Report.

[Lord Teverson (LD)]

My Lords, I congratulate the noble Lord, Lord Grantchester, on this major amendment in terms of a plan. I have been searching to find a way in which this project can be put right. The difficulty is in making it deliverable and coherent without going back to where we were 12 years ago. This programme started in 2006 and it has taken since then—the time taken for the First World War, the Second World War, the Korean War, plus a bit more—to get to 300 SMETS 2 meters. That is what we have achieved over that period of time. That suggests to me that it has not been good. Obviously, a number of Governments have been involved during that time. We all understand how important this is. This programme is not just about people not having to read the meter any more, as one of my colleagues said over lunch, but about how we manage energy in the whole economy and our nation for decades ahead. We should be leading a cultural, technical and economic change.

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[Lord Henley]

As the noble Lord is aware, SMETS 2 meters are now being installed. I cannot remember the figures given at Second Reading, but so far there have been very few. However, we expect to see a fast increase over the coming months.

We have also made clear—the noble Lord alluded to this—is that SMETS 1 will no longer count by October, the date to which he referred, and thereafter SMETS 2 will be installed. If a SMETS 1 is installed after that date and is upgraded to a SMETS 2, obviously that will count as a SMETS 2. I will take advice and write to the noble Lord if I am wrong on that. However, as the noble Lord knows, from October SMETS 2 will count in meeting that commitment.

With that, with the changes and with the gradual rise in the number of SMETS 2 installed, no suppliers will have problems in finding work for their staff, and so will not have to lay people off and bring them back on during this process.

[Baroness Featherstone]

My understanding is that there are so few SMETS 2 meters out there—mainly in supplier homes—that their testing with the DCC cannot be relied upon at this stage. Surely it cannot be done with fewer than 50,000. I am not a technician—I do not know what the number is—but 300 or fewer is not enough to ramp up the rollout of SMETS 2 in the way the Minister is suggesting.

[Lord Henley]

Again, I will take advice on that. We will come back to it on a later amendment. The noble Lord, Lord Teverson, has spoken about not moving further until we have a large number rolled out. However, my understanding is that this process is beginning to happen and that numbers are going up. The noble Baroness is looking at me in disbelief, as she so often does. We often disagree.

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[Lord Grantchester]

My Lords, I shall speak to Amendments 6 and 11 in due course. Amendment 3 places a duty on GCHQ to conduct an annual risk assessment regarding the security of the smart metering system. One of the delays experienced in the rollout of smart meters concerns whether or not the system is secure from cyberattacks. Considering that the technology used to communicate the information from the smart meters is a basic 2G technology which can hardly be said to be secure, it is remarkable that GCHQ is able to pass the system as fit and secure.

In the Minister’s letter dated 20 March, which I referred to earlier, he clarified that critical communications with smart meters will happen only when authenticated by strong encryption and independently countersigned by the DCC. I would be grateful if the Minister could clarify what that means, whether GCHQ is demanding technological improvements and whether security issues are part of the Government’s review of the data access and privacy framework to be completed this year. What processes do the Government have in place to ensure the robustness of the system? Cybersecurity is a constant challenge, and we believe that an annual risk assessment will be required to keep the UK’s infrastructure secure from potential attack. I beg to move.

[Baroness Featherstone]

My Lords, I tabled Amendment 11 to probe issues around the use of data obtained by the powers in the Bill. It takes the form of a review into the use and potential misuse of the data obtained via the smart meters scheme. The review would look at the risks of data theft and of data being passed to a third party without the consent of the consumer, and if the risk of theft or passing on without consent was substantial the report would bring forward measures to be implemented to combat such events. Lastly, the amendment would require the Secretary of State to lay a report of that review before both Houses within six months of the Act coming into force.

I think the intent of the amendment is quite clear. We have recently seen the extreme value of data to a number of organisations. It is clearly valuable in a world where we create and feed markets through information, and the more personal that information, the more targeted sales or persuasion can be. The amendment seeks to put measures in place to mitigate those risks.

[Baroness Maddock]

My Lords, Amendment 6, in my name, refers to issues that I raised at Second Reading. It calls for a review of the code of practice for energy suppliers. It is a probing amendment. I am anxious to get a bit more information from the Government about how they understand consumer engagement because I feel that whenever we are trying to deal with these issues human behaviour is the last thing about which we have serious concern. If we look back at the Green Deal, some of the disasters there were due to human behaviour, so it is important that we understand how people react. Indeed, the success of the rollout depends on consumers and consumer confidence, yet, as we have already heard, they are not obliged to have a smart meter. Therefore, how they react to the proposals is very important.

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[Baroness Featherstone]

I shall speak to Amendment 7, which is in my name and that of my noble friend Lady Maddock. Much was and is made about the upside of the benefits, or the hoped-for benefits, to the consumer of the rollout of smart meters. In the other place, the Secretary of State Greg Clarke said:

“About a third of the savings come from the possible reductions in the use of energy. Just over 40% comes from the supplier’s cost savings, which is a result of not having to read meters … We expect those savings to be passed onto consumers as savings in their bill”.—[Official Report, Commons, 24/10/17; col. 238.]


We want a new clause that makes that expectation of the Secretary of State into a reality by putting it into the Bill, and we do that by amending the Energy Act 2008 to put in a provision,

“requiring the holder of a supply licence to pass on any savings made by the holder as a result of the Smart Metering Implementation Programme to the consumer”.

I do not really feel that I need to labour the point—I think that it is clear. A promise has been made, and this is the methodology for making sure that that promise is delivered.

[Lord Stevenson of Balmacara]

My Lords, this is a wide-ranging group of amendments and it is a bit hard to find the right balancing point to address it, so I am going to give up at the beginning and just go through them one by one—in a slightly different order, just to confuse everyone.

Amendment 5 is right on the money in trying to make us focus again on why we are doing this and what it is about. It will not be worth doing unless there is an impact on energy efficiency. As we were reminded in the first group by the noble Lord, Lord Teverson, the problem we face and the one that the Government have to open themselves to be honest about is whether this will be worth having in the sense that it will actually change people’s behaviour and therefore save us some of the costs that we have from our expensive use of energy. If that is not part of what we are thinking, we need to make it part of the process and, indeed, the plan, if we go that way.

I was listening hard to what the Minister was saying, but I was expecting him to say a lot about the industrial strategy, since it is seated in his department and it seems to me that this is part of the industrial strategy. Our energy efficiency should have a material effect on our ability as a nation to continue to operate as a net importer of energy and as we gradually try to be more effective and efficient in what energy we can produce and how we use it. Those things seem crucially the bedrock on which any industrial strategy, and therefore any chance of this country surviving in the long term, is placed. I would have thought that it would be important to the Government to put this at the heart of what they were saying about the future stages of this process, because that will be helpful in convincing consumers, both those in fuel poverty and others who are just interested in the overall economics and efficiency of the country. So the requirement to lay a report that focuses on that might help us to win the battle of hearts and minds to get people more to accept it, and we support the amendment.

Amendment 7 is a bit more on the money in real terms, because it says that, if there are economic and other efficiencies in the process, the consumer should benefit from them. Again, we would support that. You do not have to be a conspiracy theorist—well, probably you do, but you do not have to be a genuine conspiracy theorist—to sense that there is something a bit odd going here. In a curious sort of way, the noble Lord, Lord Teverson, said it. Here we have an £11 billion programme. It is not being financed out of general taxation; there is a money tree, and that money tree is consumers who are being asked to pay for this without actually knowing what they are paying for. This is being loaded on to their bills and recouped by the companies. It is not being passed on to those who are benefiting from efficiencies. Nor is it being used for useful purposes for trying to help those who are suffering fuel poverty. Have I got this wrong? If I am right in this, we ought to confess that this is what we are doing and think much more carefully about the £11 billion price tag. The noble Lord, Lord Teverson, put his finger on it in saying that we ought to be certain about the benefits that will flow from this before we push the button, and his amendment, which we are coming on to, focuses on that.

The noble Baroness, Lady Featherstone, talked about real benefits to individuals. If we were interested in the consumer approach and in consumers buying this programme, getting behind it and saying that everybody should have one of these things because not only do they give you pretty pictures about what energy you are using but you get money out of it because it shows you how to reduce your costs and that benefit comes back to you, that would be an advantage to the Government, who might otherwise be struggling to get people behind this.

Amendments 12 and 13—effectively, Amendment 13 —take us back to our discussions on the first group of amendments and Amendment 4, which is tabled in my name and that of my noble friend Lord Grantchester. Amendment 13 sets as a condition of minimum confidence 500,000 SMETS 2 meters—still a very small number—which are so far really untested in operation. Going back to what I said earlier about the need to operate in the wider context of opening up for innovation and bringing in new ideas, new ways of saving money and new ways that consumers could try to do things differently in their home in their use of equipment and the internet of things, we know all these other things are there and should be part of this process and package, but they cannot be until this project goes well. This amendment might look like a simple delaying tactic, but it sets an important pausing point at which everybody who is concerned in this, whether there is a proper plan or not, can say that they have confidence to go ahead with this project because they know it works and that at least at the level of the first 500,000 of these SMETS 2 meters it is a going concern, it is terrific, we can talk it up and we can all get behind it. There is a lot to commend this amendment to the Minister and I look forward to hearing him respond to it.

The Government have a rather uncomfortable choice. It would be very sensible for them to accept either this amendment or Amendment 4 because without some sort of overall bringing together of the consumer interest, the supplier interest, the regulator interest, Parliament, which needs to have a role in this, and the Government we will not get this working properly. That will be suboptimal for the country and for everyone in the long term.

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Moved by

[Baroness Featherstone]

8: Clause 3, page 2, line 34, at end insert—
“(aa) that the cost incurred when the smcl administration order is in place is not passed on to the consumer; and”

[Baroness Featherstone]

Clause 3 seeks to protect the consumer from any costs that might ensue following a failure of the DCC. How could the DCC fail? It is a new service and there is a change in the top management at this critical point. No aspersion is intended but it is a change right at the top, and of course there are questions about the financial security of the DCC, should the parent company, Capita, run into problems. That is a timely point to make, given that my right honourable friend Vince Cable has secured an Urgent Question which is being debated right now. This afternoon Capita has revealed losses of £500 million last year, it has launched a £700 million fundraising effort to reduce its vast debt pile and its share price has plunged by 47.5%. At Second Reading it was mentioned by noble Lords across the House that Capita had issued a profit warning. They were right to do so.

We are all nervous since the collapse of Carillion. Is Capita too big to fail? What will we do if it does? Clause 3 is about insuring against the unknown, because the costs of any failure should not be a liability for the consumer. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, in this group we have Amendment 10, which I think takes the debate a little further forward. The noble Baroness, Lady Featherstone, made the case very well about the immediacy of the problem that now faces the Government and how they make progress with a company which has given a profits warning and has had to raise funding. Although it says that it might have access to many billions of pounds in borrowings and other things, it obviously raises questions of an order similar to those in the Carillion episode of a few months ago. I look forward to the Minister’s response on that, which I hope will cover the question of whether the Crown’s official involved in checking out companies that have major contracts with the Government has considered its longer-term prospects, making sure that any contracts placed with that company are satisfactorily secured in terms of delivery.

Our amendment fits in very neatly with this, at least in the sense that the reality of an administration is that it is a failure not only of the operations but of the possible costs. Like the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, we do not wish to see those costs passed on to the consumer. However, it also raises wider questions about what is going on here. In a sense, this is relatively familiar territory in that the Government are achieving a social objective using private sector activities. As was said in the other place only this afternoon, this is not new to Governments; Governments of all shapes have for the last 20 years or so increasingly used the private sector. Indeed, it is a long and distinguished history: Governments do not do very much on the ground in terms of buildings or roads. They may well carry responsibility for them and pay for them but the physical work is done by others. Outsourcing can deliver benefits. However, at a time when margins are being decreased and there is a bit more concern about whether these companies will be able to survive, we have to be very careful in what we do.

The thinking behind Amendment 10 concerns not just the mechanics of what happens in a default but whether the Government can think a bit more widely about how the company operates. Obviously, the new company, the DCC, is crucial to the delivery of the SMETS 2 programme. It is wholly owned by Capita; it has a ring-fenced arrangement with Capita but is nevertheless entirely under the control of that company. Although there are independents on the board, and everything else, do the Government really feel that that is sufficient at a time when so much is riding on it? We are talking about £8 billion worth of investment and work going forward, and everything that we have said this afternoon in relation to the future of our energy policies and initiatives and to consumer interests is certainly part of the whole operation.

When we were considering the green bank—I am waiting for the head of the noble Lord, Lord Teverson, to snap up at this point—we came across a similar problem, which was trying to make sure that the body that was being set up in the private sector, which we knew at that time was to be sold, had imposed within its structures a set of conditions under which the Government retained a golden share, to make sure that its original purposes, and green purposes in particular, were not polluted or changed by subsequent changes in the operational management of the company when it was set up or in its eventual sale. It turned out to be a very complicated issue, and I pay due credit to the noble Lord, Lord Teverson, for pursuing it to the point where we found a solution, which was not one that the Government ever thought we would come up with. But it was possible to come up with something that met the requirements that the Treasury set, unrealistic though they were, that the arrangements should not leave the Government in a direct power relationship to the company, because that would require any costs and everything else to go on to the balance sheet, but still retained the ability of the company to operate so that the green objectives were retained and operated. I am simplifying to make the point.

Does not this arise also with DCC? Is there not a worry here that we are talking about an organisation, a structure, a delivery function and an operation which suggests that we really ought to be thinking harder about the overall structure here? If the narrow question about what happens in an insolvency is insufficient to probe it, should not the wider concerns about all the companies that are going through difficulties with their delivery of public service obligations? The newspapers will be full of questions about what is happening to recruitment to the Army, because Capita is not performing very well on that, and what happens to other areas of activity. We may find that, £3 billion into the programme, the main structural body responsible for organising the network for our safety and data and all the operations that will lead to customer buy-in to this is unable to fulfil its objectives because of other financial constraints, and we do not have the right regulatory structures in place to ensure that it carries on the way it does. This amendment gives the Government at least some incentive to look at that, and I hope that they will respond positively to it.

--- Later in debate ---

[Baroness Featherstone]

I thank the Minister. I am comforted to some extent to know that he believes that the service will carry on, regardless of financial issues. I look forward to seeing the potential scale of the costs, but I disagree with him about those costs. From what has been said and from what I can glean from this whole business, I do not think at the moment that the savings to the consumer will come anywhere near the costs to the consumer. However, for the time being, I am content to withdraw my amendment.

Amendment 8 withdrawn.

Energy Security: Gas Production

Baroness Featherstone Excerpts

Tuesday 17th April 2018 Lords Chamber

Asked by

[Baroness Featherstone]

To ask Her Majesty’s Government what is their assessment of the extent to which indigenous gas production is needed for energy security.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, indigenous gas production plays an important role in meeting the United Kingdom’s energy needs, meeting 46% of the country’s gas demands in 2016. We also benefit from a diverse and flexible system of gas sources, including from Norway and continental Europe, and LNG terminals that can source gas from around the world.

[Baroness Featherstone (LD)]

I thank the Minister for his Answer, but I have three recommendations for him.

[Noble Lords]

Question!

[Baroness Featherstone]

Well, I will see at the end if he agrees with my recommendations. First, does he agree that it would be good to end the ugly and unnecessary distraction of fracking? Secondly, stepping up support for renewable gases, given the trouble the Government are in on decarbonising heat, might be a very good idea. Thirdly, making energy efficiency a national infrastructure priority would contribute to indigenous energy security. Does the Minister agree?

[Lord Henley]

Up to a point, my Lords. Renewable gas is all well and good, but it is never going to meet all our demands. As far as energy efficiency is concerned, yes, that is wonderful and it does make a considerable difference to what we are doing. As regards production of domestic shale gas, I think we should do everything we can to tap into this potential resource. I am very sorry that the Liberal party is opposed to it. Particularly at the moment, with problems with Europe’s dependency on gas from Russia and other places, there is a lot to be said for making us less reliant on imports, looking at domestic shale gas and at the opportunities that are available there.

Electricity Supplier Payments (Amendment) Regulations 2018

Baroness Featherstone Excerpts

Tuesday 27th March 2018 Lords Chamber

[Lord Grantchester (Lab)]

I thank the Minister for his introduction to the order before your Lordships’ House today. He has set out the details very well, in that the order amends the rates for the operational costs levy for the next three financial years in the contract for difference regime and the rates for the settlement costs levy also for the next three financial years in the capacity market. These costs are borne by electricity suppliers who pass them on to their customers through their bills. These costs are levied to cover the operational and administrative charges borne by the CfD counterparty, the Low Carbon Contracts Company that operates the ESO regulations, and the Electricity Settlements Company that is responsible for the operation of the capacity market.

As the Minister said, these costs have previously been calculated on an annual basis. As both these operations have been successfully running for a few years and have become predictably regular, it makes sense to convert these from annual to three-year periods. The Minister is also correct to point out that both the capacity market and the CfDs have been a success in bringing forward reduced bids at the various auctions, resulting in lower costs to consumers. Against this, it must be acknowledged that both companies are now managing increased market complexity with a greatly increased number of participants that is reflected in the increased rates in the order today.

Discussions on the order in the other place focused on these costs, the not insignificant amount that is translated on to consumer bills and the enormous cost inflation—an increase of some 700% in the operational budgets of the ESC since 2014. Mercifully, we need not rehearse those discussions today. The Minister in the other place was able to clarify that, in the case of the ESC, the number of participants increased from 46 to 447, providing initially from 0.6 gigawatts of capacity to 55 gigawatts. It was interesting that, while operational costs as part of the whole scheme should reduce from 1.6% last year to 0.6% in 2020, this is against a forecast of a fall in gross electricity demand of some 2% over the same period, meaning levy rates increase. I hope that all that makes sense to the uninitiated.

What was not discussed in the other place was that, in relation to the LCCC in the CfD market, the budgetary increase was principally due to the inclusion of a provision set aside for disputes. Paragraph 8.4 of the Explanatory Memorandum explains that the Government will keep this contingency under review but that the LCCC must have sufficient funds to defend a dispute.

My questions to the Minister revolve around disputes. What do these disputes tend to be about; what have been the past costs in the operation of the CfDs; and has any dispute resulted in a court case and, where appropriate, involved the recovery of losses, with costs being borne by the loser? These points have not been explained—perhaps the Minister could explain them now. I phoned the department this morning and I am very grateful to Fiona Reynolds for discussing the issue with me; I trust she has been able to advise the Minister. Finally, are these disputes to be categorised more as queries, challenges or appeals against decisions, and what has been the experience from past years, such that a regularity can now be transposed into a budgetary contingency? While the order can be approved today, this would be interesting to understand.

[Baroness Featherstone (LD)]

My Lords, capacity markets and contracts for difference have been a roaring success and came in during the coalition years when Ed Davey was Secretary of State—we would expect no less. The regulations will pass today, but it is absolutely right to question any rise in cost, particularly when a small proportion of it is passed on to the consumer. It is always important to keep an eye on costs and particularly when renewing a contract with an entity that is effectively the sole supplier in the field, thus making competition on pricing an impossibility—there is no one competing, so they get more.

Having read the debate in the other place, the rationale given for the steep rise in costs to the Low Carbon Contracts Company and the Electricity Settlements Company since commencement, is basically the expansion of the number of providers, as the noble Lord, Lord Grantchester, mentioned, from 46 to 447—which, of course, is a good thing—as well as the need to cover disputes. I too am very interested in the information on exactly what those disputes are and look forward to reading that in due course. We need to remain vigilant that all costs are properly scrutinised.

I could not help but note that the Minister in another place, Claire Perry, in order to assuage any concerns over the creeping inflation of costs beyond what they should be, said:

“I am always keen to run the calculator over these companies’ calculations. As the Minister ultimately responsible, I will continue to do so”.—[Official Report, Commons, Delegated Legislation Committee, 19/3/18; col. 8.]


I am impressed with the Minister’s personal intervention in this mission and trust that her background in banking and finance mean that her use of a calculator is unimpeachable—but I hope there are some accountants keeping an eye on this too. I simply wish to reiterate that companies in receipt of large sums of public money need strict monitoring. On the basis that this will happen, I am content that the regulations should pass.

[Lord Henley]

My Lords, I can certainly assure the noble Baroness, Lady Featherstone, that my right honourable friend Claire Perry will continue, as the noble Baroness quoted, to run a calculator over these issues—I am sure she will use a calculator, an abacus or any other instrument that is necessary but, just as important, she will also make use of accountants, and the department will keep a very close eye on these matters.

I think the only matter that I need to deal with for both the noble Baroness and the noble Lord, Lord Grantchester—who very helpfully let the department know what his concerns were—is how the budget, including the provision to deal with potential disputes in relations to managing CfDs, has been calculated. As the Low Carbon Contracts Company is the counterparty for CfDs, it is important that it has sufficient funds to defend a dispute if necessary. The provision included in the budget is largely based on previous experience and assumptions about potential disputes. Previous disputes have largely related to contract matters, though the nature of those will be confidential—that is the nature of such things. I emphasise that if the provision is not utilised for disputes and the surplus levy income is not required for other operational activity—we are only talking about matters relating to such activity—it will be repaid to suppliers in accordance with the regulations.

I hope that satisfies both the noble Baroness and the noble Lord and that, with their agreement, I can commend these draft regulations to the House.

Motion agreed.

Nuclear Safeguards Bill

Baroness Featherstone Excerpts

Report stage (Hansard): House of Lords
Tuesday 20th March 2018 Lords Chamber

[Lord Hunt of Kings Heath]

My Lords, I am most grateful to the noble Lord, Lord Henley, for suggesting that I go next and speak to my Amendments 7 and 9. First, I welcome the Minister’s Amendment 6 and the intention that we have regular reports on nuclear safeguards; that is clearly helpful and we look forward to receiving the first report fairly soon, so I am most grateful to the Minister for his response to our debate. I hope today that we can just persuade him to go a little further.

As noble Lords will know, because some noble Lords have taken part in the debates, we have been having concurrent debates on this Bill and the European Union (Withdrawal) Bill. Last night—fairly late, although not as late as on some amendments—we had a fascinating debate, led by the noble Lord, Lord Broers, about research and development. There is an intimate connection here, and an absolute necessity for us to continue to invest in research and development, particularly in relation to the projects that the noble Lord referred to, such as JET, ITER, research into advanced nuclear fission reactors and so on, on which our decision to leave Euratom could potentially have an impact.

In addition, we discussed in Committee medical isotopes and the concerns among medical colleagues and the health service in general. The work of Euratom has no doubt led us to deal with issues of shortage of supply and some of the issues of the rapid transport that is required. There is some concern about whether we can ensure the security of those supplies, which are absolutely essential for the treatment of many patients on a daily basis, in future. So adding a further reporting requirement to the noble Lord’s own amendment would be important and would reassure noble Lords on some of the very important issues that have been debated both here and in the EU (Withdrawal) Bill.

In relation to nuclear safeguarding, we need to be clear that we are essentially taking a kind of policing role from an international agency. Nuclear safeguards make sure that nuclear materials used for peaceful purposes are not used for military ones, so this is very important in relation to nuclear proliferation and our treaty obligations. We are removing ourselves from Euratom, establishing ourselves as a single nation, with its own existing regulator being given these duties to police our responsibilities under the non-proliferation treaties, and then having a sort of backstop of doing it in accordance with the strictures of the IAEA.

So the Government themselves are taking on a very responsible duty. Although of course I would implicitly trust any report that the noble Lord presents to us on these matters, having as a backstop an independent reviewer who could report from time to time on what is happening to make sure that those safeguards are being conducted in the way that we need to do them internationally would be an important safeguard. I hope that the Minister will see that both these amendments are wholly constructive and intended to act alongside and add to the constructive nature of the noble Lord’s own amendments.

[Baroness Featherstone (LD)]

My Lords, I have attached my name to Amendment 7. I also support Amendment 9, which will be covered by my noble friend Lord Fox.

I totally welcome government Amendment 6, which brings in the reporting system, and hope that the Minister will take Amendment 7 really as sort of an aide memoire, as if it was something he clearly forgot to put it into Amendment 6. So many areas remain of concern about the precariousness of our exit from Euratom. We discussed many of them in Committee. As we have heard across the House already today, they include the critical issue of timing, with the industries that are directly affected and their supply chains being desperately concerned to avoid the cliff edge, unsurprisingly—and all the while the clock is ticking relentlessly towards exit day. Amendment 6 seeks to reassure us in the interim with regular reporting to Parliament on key issues. However, Amendment 7 in my name and that of the noble Lord, Lord Grantchester, amends Amendment 6 and seeks to cover those key elements of concern that we felt were missing. These include information on progress, and the form that is taking shape, on future arrangements on research and development, the import and export of qualifying nuclear material and, of course, the nature and form of future arrangements with Euratom.

I and my party still remain hopeful—Liberal Democrats are obviously optimists—that common sense will at some point take hold between now and exit day, and that we will simply be able to remain in Euratom or a bespoke associate membership of Euratom will become possible, just as a bespoke trade agreement seems to be possible in the Government’s lexicon.

On nuclear research and development, exiting Euratom has put a number of concerns on the table. It would be really helpful in dealing with the uncertainties raised over the UK’s future contribution to nuclear research and development if this were included in the reporting regime. We have benefited from Euratom funding for research. As was mentioned in Committee and earlier today, the JET project based in Culham receives £60 million a year from Euratom, covering 88% of the running costs; it provides employment for 500 people implementing the contract. We are also concerned about the impact on the ITER project, which is a magnificent international collaboration intent on proving that fusion is a viable source of large-scale, safe and environmentally friendly energy for the planet.

However, it is far more than the money itself. What should be an ongoing discussion in the negotiations, and what I would like to see reported back on in relation to our leaving Euratom, should be the co-operation and collaboration that is such an important part of research in Europe. We will discuss the talented people who forge that research and development—and their ability to come and go and work in countries around Europe—in my noble friend Lord Teverson’s Amendment 8.

It is absolutely critical that we remain a key partner when outside Euratom if we are to be able to continue to hold EU and international regard as a key player as a nuclear nation. All the programmes demand close collaboration with the EU and the international nuclear community. We currently have access to research infrastructures and capabilities not available in the United Kingdom. We are also able to leverage UK investment for industry, national laboratories and academia.

Going forward—whatever the arrangement—we have to make sure that we can continue as a leading participant in the Euratom working groups and EU-funded research projects. We do not want our ability to influence and shape this agenda to be lost, nor our access to facilities, data, people and material that has enabled us to be at the cutting edge of developing technology and innovation. Therefore, as the Government go forward on this agenda, they are going to have to come to an arrangement over the future of JET with Euratom: we hope that it can be paid for by the Euratom framework programme after 2020 if that is still the end date for the UK Government’s commitment to its funding. The Government are also going to need to come to an agreement over F4E so that we can carry on participating in the fusion programme. Future arrangements must ensure that international collaboration is ongoing so that both contributing and gaining from world-leading research continues. That is why Parliament must be kept informed on progress on all those issues and why it is crucial that research and development are part of the reporting requirement.

I turn now to the import and export of qualifying nuclear material. Currently the Euratom Supply Agency has rights over such materials produced in its member states. This confers legal exclusive rights to contract the supply of those materials entering or leaving the European Union. Our current nuclear reactors are totally reliant on this fuel supply chain so, post Euratom, the Government will need to ensure this process in relation to the export of fissile materials from Euratom to the UK. This possibly—and probably—will in future become an export and may need to be authorised by the EU Commission’s research and development department. What I am describing is a future situation regarding the import and export of fissile material that needs to be worked through so there are no additional barriers, to ensure that trade in this essential market can continue. It is vital that Parliament is regularly updated on these important issues.

The noble Lord, Lord Hunt, and I have made substantive and, I hope, persuasive arguments such that I trust the Minister can see the necessity for amending Amendment 6 with Amendment 7.

Smart Meters Bill

Baroness Featherstone Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th March 2018 Lords Chamber

[Baroness Featherstone (LD)]

My Lords, this has been a good debate and a master class in damning the Government with faint praise.

In the future our energy supply, transmission and storage—everything—will change. The future will be different from the past. The big six will no longer be the big six but, we hope, just six among the many. There will be on-grid and off-grid, feed-in and feed-out. The customer will be at the heart of managing their own usage or contribution, and there will be savings of energy and in the energy cost to customers. This is an energy revolution and smart meters are a vital part of that future.

However, as many have said across this House, before they went downhill, smart energy needs to be smart. That is the lament and sorrow of the Bill because things have not happened in the right way: not the smart meter, because the first one was not interoperable—I will be grateful when I do not have to say “interoperable” too often; not the data collection; not the rollout; not the selling; and not the installation. There were delays to completing the rollout; costs which might result from delays to the system; issues around the financial security of DCC and the financial status of its parent company, Capita. It was helpfully pointed out by the noble Lord, Lord Grantchester, that there has been a recent profit warning. There were concerns over whether appropriate data protection and privacy would be provided; connectivity concerns; issues around installation visits; concerns about doorstep selling; problems with the disconnection and disposal of old meters; and problems around inaccessible homes. Between them, Members across the House have raised all those issues.

On the hoped-for benefits, in the other place the Secretary of State, Greg Clark, said that a third of the savings come from potential reductions in the use of energy, just over 40% come from the suppliers’ costs saving—not having to read meters and so on—and that he expects those savings to be passed on to the customers in their bills. I am concerned that this was put as an expectation rather than an instruction. What will the Government do if this expectation is not met? I do not think we should leave this to expectation. We should be able to assure the customer and the client that these savings will be passed on, particularly since, as many across the House have pointed out, they are paying for the whole system.

Another key issue is the extent to which data will be private. We need absolute clarity over who owns that data and for how long, who may have access to it and how it will be protected—and not just clarity but assurances on how such information might be used and by whom, and how an individual can control, with absolute confidence, access to it. Will the proposed review of data usage be widely drawn and will it be published?

Is the Minister aware that some people with disabilities have concerns about this system? As we know, people with disabilities already pay more because of higher fuel consumption, as they are quite often at home all day. I talked to one of my noble friends only today who was very concerned she would be made to feel guilty if she could not use or calibrate a smart meter to use power at a different time of day because her needs were at critical times. Could the Minister speak to that? The Minister also raised the issue of smart energy awareness. Perhaps some of those campaigns could target those with disabilities and the most vulnerable.

Looking outside of that range of issues still needing attention, the Government want the Bill to have a narrow focus on three key things. The first is the extension of existing powers, which of course they want—and need to rectify all the things that have gone wrong. I shall not reiterate all those issues other than to say that 8.5 million first-generation meters have been installed and the Government are hoping to see the rollout of SMETS 2 meters, which do not have the interoperability problems of the older meters. In a private letter to energy companies, the Government said that systems designed to handle the newer meters were not ready and so they moved back the deadline for rolling them out from July to October. That means that more than 1 million extra first-generation smart meters will be fitted in homes, despite, as others have said, the devices being criticised for going dumb when customers switch. With the deadline moving from July to October, hundreds of thousands of people will receive the older devices. Therefore, SMETS 2 and the DCC are critical, and this sort of delay, along with all the issues to do with dealing with the installation of meters in your own home, with variable fitters and information, is damaging.

One of the challenges, as mentioned by my noble friend Lady Maddock, is that the reputation of smart meters is suffering because of all the problems that have arisen, which is damaging people’s willingness to adopt the new system. The extension of the Government’s powers and the delay to the rollout of SMETS 2 are concerning. It appears the Government are extending the period because of original targets being missed and they are worried there will be further issues for which an extension of powers will be required. Will the Minister confirm that this is the rationale for the extension of powers? Will he also confirm that their extension until 2023 is not connected to a potential overrun of the 2020 deadline for the rollout of the new meters—although a number of noble Lords have put a question mark on that deadline?

The second part of the Bill concerns the introduction of,

“a special administration regime for the national smart meter communication and data service provider … ‘DCC’ … in the event of its insolvency”.

I am unsure whether we have 100 SMETS 2 meters installed or 80—or 250, as was discussed in Committee in the other place. If the number is that small, there has to be a question about how robust and how well tested the function of the DCC is at that level. That does not seem an adequate supply of data to test that system. Coming to the DCC itself and the concerns over Capita’s financial status, what checks are the Government carrying out on Capita? In addition, does the role of the special administration regime exist as of the passage of this Bill or only when there has been trouble, or can it kick in in advance of any collapse in the system? What are the protections for the consumer in this event? If a special administration regime has to be put in place because there has been a failure on the part of DCC or Capita, what can official scrutineers and the public expect in the way of transparency and information about what has happened? Can the Minister give an assurance that we parliamentarians and the public at large will not be kept in the dark about why a special administration regime has been put in place? Obviously, a further concern has to be that the costs will be passed on to the consumer. Can the Minister explain why the consumer should be in any way liable for such a failure? Would any of the costs pertaining to such a failure fall to the consumer? Would it be the whole cost or part of it? In responding, it would be helpful if the Minister could set out the costs and savings to consumers and other players so that we can see who is benefiting and who is paying, and whether we think that is fair.

I turn to the provision of new powers for Ofgem to directly modify industry codes and documents to deliver a market-wide half-hourly settlement which uses smart metering data. Noble Lords across the House have welcomed this because it is the future. The idea is that incentives are placed on suppliers to meet their customers’ demands in each half hour of the day, and smart metering is intended to produce accurate half-hourly reports to get a better settlement and thus drive innovation and the efficient use of energy. However, suppliers can already choose to settle with consumers on a half-hourly basis via an elective half-hourly settlement, but Ofgem believes that it will have to make all suppliers do this to get the best results for customers. That, as I understand it, is a decision that Ofgem will take in the second half of 2019 and will be subject to a cost-benefit analysis, which I was pleased to hear the Minister say will be published.

However, the strange part is that it was introduced in the other place through a government amendment. That is of great concern. Why did the Government know only at the end of the process that such an analysis would be needed? One does kind of expect that, given that this is a complex new system, the Government would have known in advance that an analysis was necessary. Perhaps the Minister can explain its late appearance.

Lastly, I want to reflect on the contribution made by my noble friend Lord Teverson. I am glad he will not have to fix the electricity under the stairs any more. He recognises, as have other noble Lords across the House, how important this programme is. He said that the acronyms were suspicious. Perhaps the Minister can allay our suspicions, although I have to say that the acronyms are not as bad as they were when I was a Minister in DfID. My noble friend Lady Maddock pointed out that some of us think that parts of the Bill are rosy, but then referred to the rest of it as having rosacea, or words to that effect. She spoke for those in fuel poverty and expressed her concern about the role of Ofgem under the code of practice and the approach being taken towards vulnerable people. I would welcome it if the Minister could pay special attention to responding to those and other points raised in the debate.

Nuclear Safeguards Bill

Baroness Featherstone Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Thursday 1st March 2018 Lords Chamber

Moved by

[Baroness Featherstone]

7: Clause 1, page 2, leave out lines 41 to 45 and insert—
“(9) Before making any regulations under this section, the Secretary of State must—(a) consult —(i) the ONR,(ii) the International Atomic Energy Agency,(iii) the National Audit Office,(iv) such other persons, if any, as the Secretary of State considers it appropriate to consult, and(b) lay before Parliament a written statement declaring that, after consultation with the above parties, the Secretary of State is satisfied that the ONR—(i) has sufficient staffing and financial resources to implement nuclear safeguards regulations, and(ii) is sufficiently independent to implement nuclear safeguards regulations.(9A) The statement under subsection 9(b) must be laid before both Houses of Parliament.”

[Baroness Featherstone (LD)]

My Lords, there is ongoing concern over nuclear safeguard regulations—more accurately, both Houses are generally concerned at the deluge of regulations resulting from the Brexit legislation—and there has rightly been a great deal of criticism. This amendment seeks to put further protection around the regulations to give assurance. That assurance needs to take two forms. First, in advance of any regulations, the Secretary of State must seek the views on said regulations of interested parties and responsible bodies, such as the ONR, the Atomic Energy Agency and the National Audit Office among others.

Secondly, after that consultation, the Secretary of State must lay before Parliament a Written Statement that assures that the ONR has sufficient staffing and financial resources to implement nuclear safeguard regulations. That begets a question which I hope the Minister will answer when he responds. At the beginning of this process we need to set the benchmarks for staffing and resourcing. To do that, we need to understand, on the record, what both the IAEA standard and the Euratom standard of implementing nuclear safeguarding will require in the way of staffing and resourcing.

At Second Reading in this House and in the other place, concern was expressed about what would be achievable by 29 March 2019, and the view was expressed that the ONR would not be ready on day one. Can the Minister confirm that, on day one, the standard that the Government are expecting is that of the IAEA? Can he also put on record what the IAEA standards of nuclear safeguarding are, what staffing is needed to deliver those standards and what resource has or will be made available to the ONR to deliver those standards?

Can the Minister then confirm how long after reaching the IAEA standards he would expect the ONR to reach the Euratom standard of implementing nuclear safeguarding? Given that Euratom holds to a higher standard than the IAEA, can the Minister tell us how many more staff the Euratom standard will require? Can he also put on record what level of extra resource that will require, and can he assure the House that the extra funding between the two standards will be available on demand? The Government have made clear that Euratom is their intended standard, if not on day one then on a later date.

In his letter of 20 February the Minister makes it clear that there are currently 11 safeguards officers in post who are training to become inspectors by 29 March 2019. He also states that the ONR estimates that it will take 20 safeguard inspectors to deliver its functions to a standard equivalent in effectiveness and coverage to Euratom. As I have said, the Government have been clear that their intent is to reach the Euratom standard—but, worryingly, the Minister goes on to say in his letter that reaching the equivalent Euratom standard is dependent on a wide variety of factors. That seems very loose. Can the Minister enumerate what the “wide variety of factors” is, as it cannot be left open-ended?

Moving beyond the nuclear standard regulations and their resourcing, we are concerned that the ONR must be wholly independent of its paymasters. We cannot have a situation where the Government can influence or hold any sway over this organisation. It must be unfettered in its implementation of nuclear safeguard regulations, and the reporting structure must ensure that the Secretary of State cannot direct the ONR. Can the Minister reassure us on that point?

Finally, can the Minister assure us that the statement on these issues, as amended, will be laid before both Houses of Parliament? I beg to move.

--- Later in debate ---

[Lord Henley]

My Lords, we have discovered email. I can use all possible methods.

I have given the assurance that I will ensure that noble Lords are kept informed. As I think I have made clear, I do not think the amendments are necessary or, for that matter, particularly helpful, and I hope the noble Lord will accept that we will do our bit to keep all noble Lords appropriately informed of these matters and will make the precise Written Statements that are necessary at the appropriate moment. With that, I hope the noble Baroness, Lady Featherstone, will feel able to withdraw her amendment.

[Baroness Featherstone]

Having listened to the debate across the House, I think it appropriate that I ponder what the Minister has said. For the moment, I am happy to beg leave to withdraw the amendment.

Amendment 7 withdrawn.

--- Later in debate ---

[Lord Hunt of Kings Heath]

My Lords, in moving this amendment, I want to explore the status and independence of the ONR. I have great respect for the ONR and its work, and I wish to enhance its status.

In this crucial area of nuclear safeguards, the ONR will replace Euratom in overseeing the UK’s obligations to meet international nuclear safeguard standards, ensuring that civil nuclear material is not diverted into military or weapons use. This is a distinct responsibility and is separate from the ONR’s current role in relation to nuclear safety. Essentially, the ONR will be policing the UK in respect of its international commitments, and on that basis its independent status needs to be enhanced.

A Cabinet Office memorandum of 2014 made the situation clear:

“Non-ministerial departments do not have direct ministerial accountability. Their need for independence from ministers is … greater than for NDPBs, and includes regulators and tax authorities”.


They are government departments in their own right. The memorandum continued:

“There will be a ‘sponsor minister’ who has residual policy responsibility for the continued existence of the non-ministerial department, the overall policy and statutory framework within which it operates, and represents the non-ministerial department in Parliament. However, a non-ministerial department operates independently of ministers, generally receiving funding directly from Parliament”,


negotiating with Her Majesty’s Treasury,

“and is accountable directly to Parliament”.

My argument is that the ONR should be established as a non-ministerial government department to recognise the important new responsibilities that it has been given. Some of the bodies that have that status—the Competition and Markets Authority, the Crown Prosecution Service, the Food Standards Agency, HMRC, Ofsted and Ofgem—have been considered by one Government or another to have needed that status to show that they are robustly independent. Looking at nuclear safeguard responsibilities, there is a very strong case for enhancing the status of the ONR in that way, and I hope that the Minister will be sympathetic. I beg to move.

[Baroness Featherstone]

I support Amendment 11. Part of Amendment 7 said something similar. It is very important that we are satisfied on this point so that we know for sure that there can be no interference and no misdoings—if that is the right word.