Energy Bill [HL]

Debate between Baroness Noakes and Baroness Smith of Basildon

Monday 31st January 2011 Grand Committee

[Baroness Smith of Basildon]

My Lords, I put this forward as a probing amendment to clarify the issue of liability in the event of an oil spill. There are two triggers for the amendment. The first is the group of clauses that we are coming on to discuss and the second is the debate that we had thanks to the noble Lord, Lord Moynihan, towards the end of last year on the Deepwater Horizon oil spill. It was while researching for that debate that I thought more about the issues of liability if we had a spill in this country. I understand that with the Deepwater Horizon spill the costs are huge—around $20 billion and still counting. I am not clear on the issues of liability in this country, which is an area of concern. This seems an opportune moment to raise it during our proceedings on the Bill.

There is a two-pronged approach to this. First, there are technical ways in which to do everything that we can to avoid such a spill. Secondly, we could have an insurance policy in case a spill was to occur. That is the reason for proposing this amendment. At the moment, should there be a significant oil spill, the costs would fall on the taxpayer. Would that be at a national or a local authority level? This amendment seeks increased liability cover to be required before drilling in the UK. The recent report from the Energy and Climate Change Committee in the other place dealt with this issue and highlighted liability as an area that needed significant improvement to protect the taxpayer. The financial requirements currently placed on the industry are under the offshore pollution liability agreement, but my understanding is that they are quite weak. A significant oil spill would leave taxpayers disadvantaged, because they would face potentially huge costs in order to clear a major spill from the ocean off our shores.

In proposing this amendment, we want the Government to ensure that any new offshore drilling licence is granted only when the licensee has proved its ability to meet the full costs to address the direct and indirect consequences of an accidental release of oil that occurred as a result of any operations on the UK continental shelf. The Government should also ensure that compulsory third-party insurance cover is obtained for all small exploration and production involved in drilling operations in the UKCS. When we discussed this issue before, the Minister was content that the current arrangements for monitoring in the UK were perfectly adequate. Indeed, we have some of the toughest regulations and inspections in the world, but the HSE has warned about the increase in the number of serious accidents and spills. It has said that the industry’s performance is not good enough and has urged it to up its game.

The monitoring and regulations that we have in place are significantly better than those that existed in the US at the time of Deepwater Horizon. However, I was concerned that the department’s evidence to the committee confirmed that just one inspection of a deepwater rig will take place in 2010-11. I appreciate that the Government will be vigilant, but we need some clarification on the costs and who would be responsible.

There are technical improvements that the Government could undertake. I am sure that the Minister is aware of the issues surrounding blow-out preventers and how they could be improved. Obligations might be placed on companies installing such rigs to have significantly improved blow-out preventers, doing everything that they could to prevent a blow-out and an oil spill. However, in case there was an oil spill, it would be helpful for some clarification as to where responsibility lies and whether measures could be taken via insurance on the licensees, as indicated in my amendment. Could the Minister consider that?

[Baroness Noakes]

My Lords, the noble Baroness, Lady Smith of Basildon, raises some interesting points with her amendment but I wonder if its terms are quite right. She is asking for an ascertainment of financial capability at the time of the granting of a licence. However, if a requirement is to be imposed, it needs to be a continuous obligation—that is, something that is tested at regular intervals. A licence is granted at one point in time but a spill may occur many years later, when the financial position of a company is quite different.

Secondly, it is not so much a question of whether the applicant has sufficient funds, but of whether it has access to funds via insurance. It is probably much easier to demonstrate that there is adequate insurance to cover what might reasonably be expected to follow than to look at a company’s balance sheet. I also say to the noble Baroness, wearing my accountant’s anorak, that auditors do not certify things as being “true and accurate”. Doubtless if this amendment found favour with the Minister the correct wording could be formulated.

[Baroness Smith of Basildon]

I am very grateful to the noble Baroness; her contribution was extremely helpful. Certainly, it was not the intention that the time of applying for a licence should be the only time when financial capability was assessed. The insertion somewhere in the wording of “continuous” would be extremely helpful, as is her point about access to funds via insurance. The contrast I was trying to draw was with the Government’s policy on the nuclear industry. Currently it is the Government’s policy that a nuclear power company would have to be responsible for all the costs of decommissioning for some time—indeed, for the foreseeable future. In our previous debate we talked about 100 years or so. It seemed that equal responsibility should be taken by oil companies. I am grateful to the noble Baroness for her suggestions.

Energy Bill [HL]

Debate between Baroness Noakes and Baroness Smith of Basildon

Wednesday 26th January 2011 Grand Committee

[Baroness Noakes]

My Lords, in tabling my opposition to Clause 61 standing part of the Bill, I am delighted to see that I am joined by not one or two but three noble Lords from the Official Opposition. For the convenience of the Committee, I shall also speak to Clauses 62 to 67 and Schedule 1 standing part of the Bill. Other noble Lords may wish to speak to those clauses later, but the points that I make on Clause 61 apply with equal force to the remainder of this chapter in this part of the Bill. As my noble friend Lord Jenkin has already noted, Chapter 4 deals with the energy company obligation, and I should state at the outset that I am not going to be talking about the energy company obligation itself. The issue that I raise with my stand part notifications is whether it is appropriate to legislate for something which has not yet been properly worked out by the Government.

I have mentioned in Committee the use of framework legislation, and I also raised it at Second Reading. The chapters of the Bill that we have already looked at—the Green Deal and the private rented sector provisions—are also very much lacking in detail. Indeed, to almost any of the many detailed questions put to my noble friend, he has tended to default to saying that this will all be dealt with in the later consultation on the regulations which will appear at some stage in the future. Perhaps I may remark that on that basis my noble friend has so far had a remarkably easy ride on this Bill.

As has been pointed out, it is customary with most framework Bills of this nature for advance drafts of related statutory instruments to be made available during the Committee stage of a Bill. This is important, because it allows the House to discover any issues in the way in which the Government intend to use the powers, which could be better dealt with in the Bill, or whether any safeguards are necessary. That is why it is quite normal for the Government to produce drafts of the related statutory instruments for the Committee—particularly in your Lordships’ House, where our obligations as a revising Chamber are more acutely felt than perhaps in the other place. We have not been offered that on any part of the Bill.

The Bill falls into that very small category of Bills which present a serious challenge to Parliament, and in particular to the role of your Lordships’ House as a revising Chamber. Our work is typically detailed and thorough, but it is virtually impossible to be detailed and thorough when dealing with long lists of enabling powers. The Bill is certainly not as bad as the Legislative and Regulatory Reform Act, which I am sure the noble Lord, Lord Davies of Oldham, will recall. It is not even as bad as the Public Bodies Bill, which is far from out of the woods in its passage through your Lordships’ House. However, the Bill is similar to both those pieces of legislation.

Let me read from the Sixth Report of 2010-11 of the Constitution Committee on the Public Bodies Bill. After rehearsing the history of the Legislative and Regulatory Reform Act, the report states at paragraph 13:

“The Public Bodies Bill … strikes at the very heart of our constitutional system, being a type of ‘framework’ or ‘enabling’ legislation that drains the lifeblood of legislative amendment and debate across a very broad range of public arrangements. In particular, it hits directly at the role of the House of Lords as a revising chamber”.

As I have said, this Bill is not nearly as bad as the Public Bodies Bill, but it is firmly in the same category.

I have singled out Chapter 4 of Part 1, rather than the chapters dealing with the Green Deal or the private rented sector, because Chapter 4 is so unclear and so lacking in detail on how the powers will be used, that it is simply not right to give the Executive the power to draft far-reaching regulations to impose the energy company obligation as they think fit, subject only to the affirmative procedure. That of course admits of no amendment and is a very unsatisfactory procedure for dealing with legislation which requires detailed, line-by-line scrutiny, in the way that we customarily approach things.

The impact assessment in respect of Chapter 4 has several pages of complete waffle. It is perhaps easier to go to the summary impact assessment, and I shall read from page 8. Under “Costs”, it states:

“There are no costs associated with the primary powers”—

the primary powers in Chapter 4 of Part 1—

“however, depending on the level of the ECO there is a potential for significant costs to suppliers in meeting the obligation which ultimately we expect to borne by consumers”.

Under “Benefits”, it is stated:

“There are not direct benefits from the primary powers, however they do enable future policy which has the potential to deliver benefits associated with energy and thermal efficiency measures”.

I note from the summary that there are likely to be significant costs. They are not costs that will be borne by the companies or taxpayers; they are costs which, as is fully anticipated in the impact assessment, will be passed on to customers. Therefore, there could be significant rises in energy bills, but neither customers nor the energy companies or Parliament will have any real influence over their size or incidence.

My contention is that this part of the Bill is simply not ready for passage as primary legislation. I do not challenge the fact that something may well be necessary in due course, but I believe that it would be correct for the Government to decide what to do, to consult on it and then to bring forward primary legislation to implement it, giving both Houses of Parliament—but in particular your Lordships’ House as a revising Chamber—the opportunity to do the job that it does so well. In that way, Parliament could give proper consideration to the practicality and fairness of how this area is to be tackled and its impact on companies and, importantly, on consumers. For these reasons, I do not think that these clauses should stand part of the Bill.

[Baroness Smith of Basildon]

My Lords, I want to make a very similar point relating to Clause 61 but also to Chapter 4 as a whole. We raised with the Minister previously the question of the amount of legislation that will need to be resolved through secondary legislation. There are 52 separate items in this Bill that would be dealt with through secondary legislation. I have had difficulty in understanding in detail what the ECO proposals really mean and how they will operate. It is a serious matter when it is difficult for noble Lords to assess the impact of the operation and the amount of money that will be involved for consumers as well as providers, because so little information can be provided in the legislation. It is all to be done by secondary legislation.

It might have helped the issue to be resolved if there had been a purpose clause at the beginning of this chapter, not dissimilar to the one that I proposed at the beginning of the Bill. Such a clause could set out what this chapter is seeking to do and the purpose of the energy company obligations. Without it, it is very difficult to assess the proposals put forward in the different clauses. Therefore, I have some specific questions for the Minister, although he may not be able to answer them, because the answers have not yet been compiled.

The noble Lord will recall that, possibly at Second Reading but certainly in the meetings that he has been generous enough to have with noble Lords prior to and throughout the passage of the Bill, I have raised with him the concern that the noble Baroness, Lady Noakes, has also spoken about—the need to have drafts of statutory instruments before us when we are considering these matters. Seeing the detail of where the Government intend to go would help to inform our discussions; otherwise, they are held in something of a vacuum. I certainly find it difficult to discuss the detail of the clauses.

Perhaps I may raise some specific questions to which the Minister may be able to respond. One question with which I struggle is whether the ECO is effectively and appropriately linked with the Green Deal. Without that link, I am not sure that the ECO can deliver, which is why I mentioned the purpose clause at the beginning. Like the noble Baroness, Lady Noakes, at times I find the impact assessment difficult to read, and it is probably best not to try reading it during a late-night sitting of this House. The impact assessment states:

“The domestic sector has the potential to play a big role in meeting the UK’s carbon budgets by delivering cost-effective emission reductions. Under Green Deal there is a range of policies aimed at helping households install cost effective energy efficiency measures. However there are a range of market failures (positive externalities) and barriers (e.g. consumer inertia) that are likely to continue to restrict households from undertaking cost-effective abatement measures”.

It goes on to set out the difficulties, saying that,

“it is necessary to gain the powers to intervene to ensure that energy and thermal efficiency programmes are focussed on delivering measures in vulnerable and hard to treat houses”.

Because the purpose of the obligation and how it underpins the Green Deal are not defined, the provisions in the Bill for the energy companies do not state how these measures are intended to be delivered or how those most vulnerable households will be assisted. There is a lack of clarity about how this will work, and I am sure that the Government could do more to assist the Committee in bringing forward some information regarding it.

Energy Bill [HL]

Debate between Baroness Noakes and Baroness Smith of Basildon

Monday 24th January 2011 Grand Committee

[Baroness Noakes]

My Lords, before the noble Baroness, Lady Smith, decides what to do with her amendment, I will say that my amendment—Amendment 20L—seeks to go beyond what is in Clause 36(5)(b), which the Minister rightly said covers,

“the extent to which financial assistance is available”.

I accepted that, but I went on to ask for the review to ensure that financial assistance is “known to be available”. The Minister did not cover that point in his summing up—unless I missed it—and I would be grateful for his comments.

[Baroness Smith of Basildon]

While the Minister seeks inspiration on that point, perhaps I may put to him that my comments and my amendment seek to probe whether there should be additional items in the review, but he did not address that, either.

--- Later in debate ---

[Baroness Smith of Basildon]

Amendment 20PA, which is in my name, is in some ways not dissimilar to the amendment in the name of the noble Baroness, Lady Maddock. I think that we are perhaps trying to achieve the same ends in different ways. We both raised concerns that any regulations introduced by local authorities should not be conditional on a review taking place. It is worth looking at the scale of the problem, which we will perhaps do in respect of the next group of amendments. Nineteen per cent of private tenants live in fuel poverty. The figures and the impact assessment show how great the problem is for those who live in the private rented sector, the difficulties that they face in meeting their bills and the impact of living in cold properties on their health.

Properties in the private rented sector have the worst energy performance rating of any property sector in the UK. My amendment takes a slightly different approach to that of the noble Baroness, Lady Maddock. However, we share a widespread concern about the timing of the review and the fact that until the review takes place no regulations can be brought in. We do not want the action to be conditional on the review, but any regulations brought in must improve energy efficiency.

As regards the number of properties available to rent, no one wants to see a decrease. However, the issue is the degree of decrease. I am sure that although the Minister will tell me that the word “significant” is not normally used in legislation, he will understand the point that we are making. There may be times when it is appropriate to have a short-term decrease in the rented housing stock in order that work can be undertaken, but no one wants to see a permanent or a long-term decrease. We have put in the word “significant” to address that and to tease out from the Minister what he anticipates when he refers to a decrease in the housing stock.

The clause raises the enormous concern that the regulations will be pushed so far into the future that the significant problems of energy efficiency that exist now for people living in fuel poverty in the private rented sector will not be addressed. I am grateful to the Residential Landlords Association, to which we will come in the next group of amendments. The private sector needs certainty. As the Bill stands, all that it knows is that there will be a review, after which it may be required to undertake energy efficiency measures. But there is no clarity or certainty. This is a probing amendment. I hope that the Minister understands the points that are being made and why the concerns have been raised; namely, that great problems exist in the private rented sector.

[Baroness Noakes]

My Lords, I shall speak to Amendment 20Q in this group. I allowed it to be grouped with Amendments 20P and 20PA because it gives a contrasting view on the topic. The amendment moved by my noble friend Lady Maddock, and that spoken to by the noble Baroness, Lady Smith, seek to remove the conditionality, either totally or in relation to the report, before regulations are introduced. My concern, which I expressed earlier, is to ensure that regulation is not introduced unless there has been careful thought and consideration, because a regulatory solution would be an admission of failure and is not to be undertaken lightly.

Clause 37(1) requires not only that the report is published but that the Secretary of State considers that the regulations will improve energy efficiency and not reduce the number of properties available for rent. Those are the good requirements prior to the introduction of any regulation, and I support them. Amendment 20Q adds another requirement, namely that the report should be approved by both Houses of Parliament. We have already discussed the fact that the use of the regulation-making powers in this chapter could have a significant impact on the private rented sector, both in terms of economics and of the regulatory burden that could be laid on it. It will be important to ensure the widest possible consideration of the impact of any regulation. I tabled my amendment in relation to Clause 37, but my points apply also to Clause 40, which covers the power to make tenants’ energy efficiency improvement regulations. Both will have a significant impact.

Let us assume for a moment that the Secretary of State is some kind of ideologue who sees everything through green-tinted spectacles. While not for a moment would I say that this is a description of the current holder of that office, let us assume that we have such a green ideologue in the position of Secretary of State. That Secretary of State appoints another green ideologue to carry out the review, because Clause 36 makes no requirement for the reviewer to be an independent person. We could easily get one ideologue appointing another ideologue—there are rather a lot of them around in this area—to carry out a review which would then be undertaken from a particular set of prejudices. My amendment, in addition to providing the ordinary involvement of Parliament in such an important decision at any early stage and not simply in approving regulations, in approving the report would also be able to provide some kind of counterweight if a green bias was built into the review.

I am aware, of course, that there is a form of institutionalised bias along certain lines in both Houses of Parliament, and that Members of both Houses have a wide range of views on these issues. It is therefore important that the findings of the review are subjected to full and dispassionate scrutiny by both Houses and approved as the basis, effectively, for the Secretary of State to go forward and introduce regulations. While I have treated this in a rather light-hearted way, there is a serious point here in that we want to be clear before defaulting to regulation. This would provide another pause in the process before ending up in regulation. For that reason, I hope that the Minister will favour my amendment in this group and not those of the two other noble Baronesses.