Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Jenkin of Roding(10 years ago)
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Lord Jenkin of Roding
My Lords, it needs to be remembered—indeed, the noble Lord, Lord Davies, has acknowledged—that the industry very much welcomed the report of Sir Ian Wood.
Noble Lords will remember that perhaps the most important recommendation that Sir Ian Wood made was that in future if we are to maximise the economic recovery of oil and gas, there needs to be a tripartite partnership of the Government, the industry and the regulator. The industry signed up to that. That has been the basis of the substantial amendments which were moved in Committee with the intention of implementing the Wood review, and I am on record as having welcomed them very warmly.
I am aware of the concerns which have been voiced by the industry—to which the noble Lord, Lord Davies, has referred—but I take much comfort in the recent appointment of Andy Samuel as the chief executive officer of the Oil and Gas Authority. As my right honourable friend Mr Davey announced in the Statement last week:
“This is a significant milestone in the establishment of the OGA and demonstrates our commitment to the UK’s oil and gas industry and implementing Sir Ian’s recommendations”.—[Official Report, Commons, 6/11/14; col. 53WS.]
It has to be remembered that Andy Samuel has a very long background in the industry. He will understand as well as anybody the problems of getting industry members— hitherto seen as competing with each other all the time—to work together in this tripartite arrangement. Therefore, while I understand the concerns, I do not share the problem of the noble Lord, Lord Davies, because I think the industry is well placed to take this forward and achieve the very substantial advantages of additional production and national revenue that were outlined. I think these amendments are probably necessary to reassure the industry but I believe the industry is firmly committed to the tripartite partition for which Sir Ian called.
Baroness Verma
My Lords, I am extremely grateful to my noble friend for his intervention and contribution, because he lays out very clearly our position. In responding again to the concerns of the noble Lord, Lord Davies, we are committed to ensuring that the regulator is as strong, competent and influential as a regulator should be. However, it is important to ensure that the powers are practical and effective and do not create unintended consequences, as I stated earlier.
It is also important that we do not undermine investment in the UKCS at such an important time. As part of the call for evidence we will engage with interested parties to discuss how the strategy for maximising economic recovery should apply to commercial arrangements. The noble Lord, Lord Davies, asked if Sir Ian Wood was content with our amendments; the understanding is that he is content, but he also understands very clearly that we must not be undermining investment at this time. It is not our intent that the OGA has the ability to directly interfere with new or existing commercial arrangements. We will ensure that the strategy deals with commercial arrangements in a sensible and proportionate way.
We have listened very carefully to all concerns from industry and other stakeholders but, as my noble friend Lord Jenkin has rightly said, this is a tripartite understanding of investment within the UKCS, and therefore I hope that the noble Lord, Lord Davies, is content with my descriptions of why the amendments are important.
Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Jenkin of Roding(10 years ago)
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The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I thank the noble Baroness for tabling the amendment and my noble friend for his contribution.
The amendment seeks to extend the scope of the community electricity right provisions to include all electricity generation. I listened very carefully to what the noble Baroness said about also looking at different models. I hope I will be able to lay out clearly that what we are trying to do, in the first instance, is to take the positive step of focusing on community-shared ownership of renewables but our drive really is to increase that shared ownership as a positive step in enabling people to take some stakeholding in their local communities and to drive forward a voluntary approach, as has been worked through the Shared Ownership Taskforce.
We have made it very clear that we are not excluding other forms of energy; we are just saying that within the renewables sector we are concentrating on wind and solar, which are two mature sources and therefore it is easy to demonstrate their benefit to local communities. We are absolutely clear that this legislation should apply only to renewable electricity technologies. There are two key reasons for this.
The noble Baroness said that some communities embrace renewables and others do not. We want to bridge that disconnect between national and local benefits for renewable electricity schemes. What we have seen often is that nationally there is great support for the renewables sector but that is not always reflected when it becomes a local issue, where the impacts are felt directly by communities.
What we want to do through this legislation is to seek to redress the imbalance by ensuring that communities have the opportunity to get much more involved and can develop a real sense of ownership of local schemes being developed on their doorstep. This is about promoting decentralised energy generation that is happening in people’s homes and in local communities right across the country.
Renewable electricity generation, particularly from technologies such as wind and solar power, is now well established. This typically translates into lower risk profiles for community investors, which is an important safeguard. It is important to remember that shared ownership is still very much a developing concept in this country. The Shared Ownership Taskforce published its final framework on Monday, and I very much take on board the point my noble friend made that it came a little later than expected. The members of the taskforce have worked long and hard to develop a framework which both developers and local communities can work with. This has been a challenging task, even for the most established renewable technologies where there are successful case studies working on the ground.
To say simply that we need to extend the concept of shared ownership to all forms of electricity generation, without proper consideration of the inherent issues that each faces, therefore makes little sense to me when the voluntary approach on shared ownership to date has been solely developed for, and has focused on, those particular renewable sectors. It is right that, if these powers were ever exercised, we would expect them to focus specifically on established and mature renewable electricity generation technologies, such as solar and onshore wind.
I would like to reassure the noble Baroness again that this is the first step in increasing community shared ownership of renewables. If it is successful, there is nothing to stop us considering extending it to other technologies, because we want lessons to be learnt and to do the proper consultation that everybody would expect to take place when we extend this.
In responding to a couple of questions that were raised by my noble friend, we are encouraging local electricity discount schemes and recognise that they are a valuable initiative which we wholeheartedly support. However, we must remember and recognise that offering reduced-price electricity is giving a gift to the community, not providing the community with the chance to invest in schemes such as community electricity. There is a slight difference there, which we need to be able to recognise.
Lord Jenkin of Roding
A moment ago my noble friend said that there was absolutely nothing to prevent the scheme being extended to other forms of community involvement. However, the word “renewable” is in the first paragraph of the first clause of the part of the Bill which deals with energy. Will extending it to other forms require further primary legislation?
Baroness Verma
It would require proper consultation. We would have to go through the proper consultation processes to ensure that, having seen what has worked or not worked with these initial schemes, when going forward on including other schemes we are able to respond to the needs of those technologies. That is what local communities will ultimately have to face. It is not about primary legislation; it is about looking at how we would be able to add those new schemes through consultation. We have said very clearly that we are not stopping or excluding other provisions of electricity supply. We would have this opened up but we are starting with the focus on the renewable sector. I hope that I have been able to make that a little clearer to the noble Baroness. If I have not done so, I will repeat what I have already stated: these provisions would apply only to renewable electricity schemes. To clarify my noble friend’s point, we would have to readdress it in primary legislation.
Baroness Verma
My Lords, I thank my noble friend for tabling these amendments. The first part of Amendment 109 seeks to include a requirement on government to conduct a progress review of the voluntary approach and report the findings to Parliament before regulations may be made in respect of onshore facilities. The second part seeks to require government to appoint a panel of experts to review, advise and report on community stakes in relation to offshore renewables before regulations may be made in respect of offshore facilities.
To start with the first element of the amendment, as I mentioned in an earlier discussion, the Shared Ownership Taskforce published its final framework on Monday. I appreciate that there has not been much time to consider it, so I will set out today the relevant commitments that the taskforce has made in relation to reviewing and reporting progress. In doing so, I hope to demonstrate that there is already a clear process in place for reviewing and reporting. As such, there is no need to include these additional requirements in the Bill, as my noble friend proposes.
The taskforce intends to set up a monitoring group to ensure that progress is evaluated and reported. It proposes six-month and 12-month reviews and will report its findings to my department. As set out in the Community Energy Strategy, the Government will conduct a review of progress next year. The findings from the taskforce’s progress reviews will be critical to this. The Government wholeheartedly support the work of the taskforce. We will be formally responding to its report early in the new year. In it, we intend to endorse its monitoring and reporting process and confirm that this process will feed into the Government’s review next year. Both the Shared Ownership Taskforce and the Government will be monitoring and evaluating the success of the voluntary approach prior to backstop powers coming into force in line with the Government’s Amendment 129, which we will debate a little later.
Turning to the second part of the amendment on offshore renewables, our focus now is on increasing community shared ownership for established onshore technologies such as onshore wind and solar. These are the technologies covered by the Shared Ownership Taskforce’s voluntary framework. Having said that, the community electricity right powers provide future flexibility to include offshore technologies, but we have been very clear from the start that this would be on a longer timescale. This is not to say that we would not encourage offshore developers to offer a stake to communities where they choose.
The suggestion that my noble friend Lord Jenkin makes in Amendment 109 is sensible. If the Government were ever to consider exercising these powers for offshore renewables, I agree it would make sense to set up a panel of independent experts to provide advice on offshore renewables in advance. This would be a similar approach to the one we have taken for onshore renewables with the Shared Ownership Taskforce, which is comprised of experts from the renewables industry and the community energy sector. However, at this stage our focus is firmly on onshore renewables. It is not our intention to establish a voluntary process for offshore renewables right now. As such it would be premature to commit to this and to restrict ourselves at this point to the wording that my noble friend has proposed. We should therefore wait and consider the option of a panel of offshore experts when we have a clearer position on whether this is needed, and if so, what any panel might look like and report on.
Amendment 110 seeks to introduce an obligation on the Government to consult a range of interested parties in advance of exercising the community electricity right provisions and developing any secondary legislation. I completely agree that consultation is essential to ensure that the Government hear the views of all relevant stakeholders and take them into account before deciding the best course of action. These views will also be critical to the formation of secondary legislation that is fit for purpose and can be implemented successfully. However, I do not believe the amendment is necessary. In Grand Committee I made it clear that the Government intend to conduct a formal consultation before exercising the powers. That position has not changed. The consultation would be open to everyone, including the parties listed by my noble friend in Amendment 110, such as community groups, developers, the Scottish and Welsh Governments and Ofgem. My noble friend’s amendment includes some of the very organisations and bodies that we would expect and encourage to contribute to a public consultation given their clear interest, knowledge and understanding of this area.
I will provide a single response to Amendments 111 and 112 as they are inextricably related. I recognise that this is an extremely important aspect of the provisions, particularly in terms of providing future certainty to the renewables industry. The community electricity right provisions would apply to new renewable electricity projects coming forward in the development process. I confirm that the provisions would therefore not apply retrospectively nor to projects that have already received planning consent. The Government have always been clear that this is our policy intent. For example, the Explanatory Notes to Clause 28(5) explain that this provision ensures that the regulations would not apply retroactively and would apply only to facilities that have not, at that date, reached a specified point of development.
While I am keen to provide these reassurances in the House, it would not be right for me to commit to include in primary legislation a qualification that the regulations may not apply to projects that have applied for, but not yet received, planning consent. That may be an appropriate approach to take, but as I am sure my noble friend will understand, the Government would wish to consult on this matter before making a final decision. In doing so we would look closely at the experiences of successful shared ownership schemes including lessons learnt from the voluntary approach. In conclusion, I hope that I have provided noble Lords with enough reassurance about the Government’s position on these matters and, on this basis, I hope my noble friend Lord Jenkin will withdraw his amendment.
Lord Jenkin of Roding
My Lords, I was grateful for the support of the noble Baroness, Lady Worthington; I hope that she will share my view that we have got almost all that we want. The amendment has not been agreed, but my noble friend on the Front Bench has gone as far as one could possibly expect to say, “Without actually accepting your amendments, we are going to do pretty well everything in them”. It will be for the other place to decide whether that is sufficient or whether it would like to see these included in the Bill. As I explained at the end of my speech, that was the purpose of moving the amendments on Report. Having said that, I thank the Minister for what she said and take much pleasure in begging leave to withdraw the amendment.
Baroness Verma
My Lords, I am grateful to my noble friend and the noble Baroness for their contributions. We listened carefully to my noble friend in Committee and I have very much taken on board all the views that were expressed on that matter, including those of my noble friend, industry stakeholders and the Shared Ownership Taskforce. I am pleased, in response, to bring forward government Amendment 129 which revises the date of commencement of these provisions to 1 June 2016. That ensures absolute clarity on the minimum amount of time the Government intend to allow for the voluntary approach to take effect. It means that the Government could not exercise these powers before 1 June 2016 at the very earliest. This date allows just over 18 months from the date on which the Shared Ownership Taskforce published its voluntary framework, earlier this week, to when the powers may be exercised. I hope that by bringing forward this amendment I shall allow my noble friend to go home feeling satisfied with his input, which—as much as is possible—is always my intention.
Lord Jenkin of Roding
I am grateful for my noble friend’s graciousness. She has gone a long way to meet us but, as has been indicated in the original amendment tabled by the noble Baroness, Lady Worthington, I think there is a lot more exploration that will need to be done in the other place. In the mean time, I beg leave to withdraw.
Electricity Capacity Regulations 2014
Debate between Baroness Verma and Lord Jenkin of Roding
Lord Jenkin of Roding (Con)
My Lords, my noble friend the Minister has made a very brave and thorough attempt to explain all these complicated regulations to the Committee and I do not envy her her task. This is an immensely complicated business, and I approach this as one who has spent many months over the last two or three years dealing with these matters—first on the Energy Bill, now the Energy Act 2013, and in the months since then. I see that I am surrounded by a very select band of aficionados who have been doing the same, and I think that between us we have the capacity to put some questions to my noble friend.
I entirely endorse the description of the scrutiny committee, which reported a few days ago. In paragraph 9 of its report, it said:
“The number of statutory instruments laid, and the highly detailed nature of their provisions, are not conducive to a rapid understanding of their effect”—
to which I can only say, “Hear, hear!”. Of course, the committee expresses some anxieties about how far consumers can be helped to understand these measures. In response to that, the then Minister for Energy undertook to provide what he described as an,
“additional, succinct explanation of the legislation”.
I invite noble Lords to look at Appendix 1 to the Select Committee report. I m not sure that the six pages of detailed description can match what Mr Fallon said on that occasion. This is a serious problem. The scrutiny committee was clear that much more needed to be done to explain this complicated system to consumers.
Baroness Verma
My Lords, I thank all noble Lords for their helpful remarks and questions. It has been a well informed discussion. These are complex measures and, quite rightly, my noble friends and other noble Lords have asked for clarification. If I do not respond to any questions raised during the debate, perhaps it might be helpful if I undertake to write to noble Lords and place copies in the Library. There were a large number of questions and it may well be that we have overlooked some of them.
I start with the questions posed by my noble friend Lord Jenkin. I would like to put on record my apology to my noble friend for responding to his letter rather late. There were gremlins a-playing and I can only blame them. I hope my noble friend will agree that usually I try my level best to give prompt—and maybe lengthy—responses to questions that he and other noble Lords put to me in the department.
We want to ensure that independent generators are very much part of what we are trying to deliver; making sure that the lights stay on, and driving down costs to the consumer through competition. A number of questions were put to me around that matter. My noble friend raised the issue but other noble Lords have added their concerns about why it cannot be April rather than the October date that has been laid out. I will try my utmost to bring the date as far forward as I can and I will be happy to meet independent generators to give those assurances. However, noble Lords who know me will know that I would rather play on the side of caution. Rather than over-promise and then fail to deliver, I would prefer to put in place a date I feel I can deliver. That does not stop me—I hope my noble friend and other noble Lords will take away this assurance—from pushing to get an earlier date, but I felt I could deliver on the October date.
As always, my summer holiday will be spent pushing dates with officials, but perhaps my noble friend can take back to the independent generators that the date is not set in stone; that it is there because I would rather not over-promise. I am willing to work closely with the independent generators and I would be happy to meet them and reassure them. Perhaps my noble friend will take up that offer.
My noble friend asked how much capacity will be procured. The Secretary of State confirmed on 30 June that the first delivery year will procure 53.3 gigawatts for 2018-19. These will be procured at two auctions: one later this year will procure 50.8 gigawatts, and the second phase in 2017 will procure 2.5 gigawatts. He also asked if the indicative CFD budget included the contract for the capacity measure. The answer is no. The interactive budget numbers published this morning relate only to the CFD mechanism.
My noble friend inquired about the Bill’s impact on the CFD. My department’s latest analysis suggests that household electricity bills will, on average, be about 6% lower per year over the period 2014-30 under EMR compared to meeting the Government’s objectives under the existing policy instruments. It is estimated that the annual electricity bills of businesses will be around 7% to 8% lower.
Lord Jenkin of Roding
I am grateful to my noble friend for that. She reiterated the statement made this morning by her Secretary of State regarding 6%. I hope that my noble friend Lord Deben will forgive me for asking this question again. The sums spoken of in the EU Commission’s consent for state aid are very large. Unfortunately, I sent the numbers to Hansard, so I do not have them in front of me. My question is: how much of that represents subsidies that will have to be paid by consumers? The Minister will know that I have another amendment, which we will be discussing in October, to the Infrastructure Bill, under which I am asking for us to know what it will cost consumers. This is the same question. It is not the overall cost; it is how much of the cost of contracts for difference will fall on consumers.
Baroness Verma
I am extremely grateful to my noble friend for that clarification. I hope that I will be able to respond to that. If not, if my noble friend will allow me, I will write to him.
I am always pleased by the great energy with which the noble Viscount, Lord Hanworth, contributes to our debates but, as my noble friend Lord Deben pointed out, we had a very dysfunctional system before, so we need to go forward by ensuring collectively that the systems we have put in place since privatisation allow for greater competition, for costs to be driven down and, especially, that we are meeting our carbon commitments as well as ensuring security of supply.
I do not agree with the noble Lord’s premise about how we are approaching this. These are complex instruments and, with complex instruments, we have to ensure that people reading them can understand them. I undertake to try to make the instrument easier to understand. The noble Viscount showed me a big pile of notes. Sadly, all of us have had to drive through those because of the complexity of the Energy Bill 2013 and what we are trying to deliver through it.
I thank my noble friend Lord Deben for his intervention. First, I put on record our appreciation for all the work that he does as chairman of the Climate Change Committee, his great understanding and the very useful support that we gain from the work done by him and his committee. I agree completely that we need a real mixed portfolio of technologies and that, although energy security is crucial, we must not lose sight of our commitment to reduce carbon emissions by 80% by 2050. Therefore, it is important that, when we are talking about the need for energy security, in everything we do we are mindful of that target as well.
My noble friend also asked whether we were doing enough to push for competition. Vigorous competition and transparency is the key to keeping prices as low as possible, and to raise consumer confidence in the market. It is in a much better place today than it was when we first came to power in 2010. That is because there are now many more players in the market—although, I entirely agree, not enough. We have to open up markets and make them certain for the smaller players so that we do not have them disappearing, as they did when we the big six took over by consuming them.
The noble Lord, Lord Whitty, asked whether consumers understood what EMR was. I know that many of us have stood at the Dispatch Box with that question in mind because it is incredibly complex. I can assure the Committee that I have looked at different ways of making sure that the message goes out to the consumer. Ultimately all of us are working to ensure that consumers are the beneficiaries and can understand the policies that we are trying to deliver. As with all complex pieces of legislation, it is about how we bundle it up without losing the underlying measures that we are trying to deliver. I will take the noble Lord’s views back to the department and instruct it again to try to talk in a language that has more outreach. But with complex legislation, there are limits to what we can do.
The noble Lord also asked what engagement we have had with consumer groups. He is aware that we have been closely involved with all stakeholders, including consumer groups. They have been part of every discussion and we have consulted them on everything that we are doing. It is important to say that as far as we are aware, we have not tried to exclude anyone, but have taken their views on board. The noble Lord also asked about allocation rounds and whether they should operate on a quarterly basis. An allocation round takes about three to six months, depending on whether there are any appeals. This means that the earliest another allocation round could be scheduled would be around May or June next year, when we know how many contracts have been signed and are able to reallocate any unspent budget.
The noble Lord also said that there was not enough support for solar. The noble Baroness, Lady Worthington, also mentioned that. We work closely with the solar trade associations and others to assess the RO grace periods and other issues that have been raised by them to ensure that full participation is possible in the CFD auctions. The amount of money allocated to Part 1 in this allocation round and in the indicative budget for October 2015 will enable around 1.6 to 1.8 gigawatts of solar PV deployment, and potentially more depending on the strike price at which individual projects will bid for.
The noble Lord, Lord Oxburgh, asked about consultations, particularly with smaller players in the market. I can assure him that more than 30 consultations have been published on EMR since last summer and overwhelmingly, a number of them were to ensure that we had given support to stakeholders, particularly the smaller players. We wanted to ensure that they could understand the reforms and effectively engage in the consultation process. If the smaller players feel that they have not been involved enough we must do more, but the department has worked incredibly hard to engage at all levels with smaller players. The noble Lord, Lord Oxburgh, and the noble Baroness, Lady Worthington, asked why CCS was not mentioned. It is an eligible technology and I draw the Committee’s attention to Part 10 of the allocation regulations which enables the Secretary of State to direct the CFD counterparty to offer, for example, two CCS generators.
The noble Baroness asked about the impact of a dynamic despatch model on capacity. It is quite complex so if the noble Baroness will allow it, I will write to her and to other Members of the Committee.
Infrastructure Bill [HL]
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, I am extremely grateful to my noble friends Lord Jenkin and the Duke of Montrose, and to the noble Baroness for her contribution. This debate on Clause 26 allows me to lay out why we consider that what the Government are doing is absolutely the right approach. At the same time, I will address the matter of my noble friend’s Amendment 98AB, which seeks to delay commencement of the provisions by two years.
As we all agree, shared ownership is a key way to galvanise support and acceptance from local communities. That is critical for the future of the renewables industry. I have said previously that this Government have set out a logical and sensible approach to achieving that, first, through a voluntary means. Then, only if that is not successful, would we consider bringing forward legislation—and that only following a formal consultation.
With that in mind, I will respond to the points that my noble Friend Lord Jenkin raised today. First, I do not agree that the Government do not trust industry to deliver the voluntary approach. As I said before, the Government have set up an industry-led task force to drive an increase in shared ownership. We hope and believe that shared ownership will be achieved in that way. If we do not trust industry, as my noble friend suggested, why would we have set up a task force in the first place? I welcome the fact that the Shared Ownership Taskforce is—
Lord Jenkin of Roding
I should have explained that the question of the Government giving the impression that they do not trust industry is something of which I was informed by RenewableUK. One of its senior officials is a chairman of the task force. I have to assume that she understands that lack of trust as well. Perhaps she did not put it in her report but nevertheless her organisation made it perfectly clear to me that that is how it interprets this threat of legislation.
Baroness Verma
I am grateful for my noble friend’s intervention but reiterate that we are working closely with industry. That work, through the Shared Ownership Taskforce, is going well. We commend the publication of its draft report. However, it would be naive to expect all those in industry to welcome this with open arms. Taking legislative powers has helped bring this matter to the forefront. The possibility of legislation has encouraged industry to take this matter seriously and provide the commitment necessary for the voluntary approach to succeed. The Government’s firm view is that the backstop powers are needed precisely in order for the voluntary approach to work. It is basically a call to action.
My noble friend made the point that there is nothing stopping Government legislating, even if the voluntary approach works. I would like to be absolutely clear that that is not our intention. The backstop powers would be exercised only if the voluntary approach does not succeed. In determining success, we will be guided by the task force and the outcome of its review in 2015. The Secretary of State for Energy and Climate Change addressed the task force to reassure it on that point. In addition, he provided further reassurance that, in order to give sufficient time for the voluntary process to take effect, there was no intention of exercising any power before 2016, if at all. In the Queen’s Speech debate in the other place, he reiterated this point:
“Since we are pursuing a voluntary approach, the power in the Bill is a back-stop. The community energy sector was clear that the voluntary approach should be given a chance to succeed, and I agree”.—[Official Report, Commons, 5/6/14; col. 139.]
Baroness Verma
I apologise for not being able to respond to the noble Baroness. I had a note to say that I would be writing to her because it was a detailed question. I will ensure that Members of the Committee get a copy.
I hope that I have been able to reassure my noble friend Lord Jenkin as to why Clause 26 should stand part of the Bill and convince him that delaying commencement of these provisions is not the right approach.
Lord Jenkin of Roding
My Lords, I take some comfort from what my noble friend said in response to this short debate. She said she will do her best to see that we get some indication of what is going to be in the regulations, and I very much welcome that. I understand her argument about not wanting to tie herself down. The Government would tie themselves down by taking a legislative power or even indicating legislative powers some years before they have to become operative because there may be many lessons to be learnt before that time. It is quite clear that we are going to have return to this on Report.
I was slightly surprised and disappointed that my noble friend told the Committee that we are not going to get the final report from the task force until October. It is having a consultation phase—and I refer to the first page of the task force draft report—before publishing the final report in September, because the task force would like to seek wider views. The difference between September and October is quite crucial, because we will resume the sittings of this Committee in October, perhaps within a day of reassembling. That will be followed in due course by Report, at which stage we will presumably wish to come back to this, having moved beyond this part of the Bill. So this is really rather important. I hope that my noble friend might be able to convey this to the chairman of the task force. She said September, and there are people in the House who would like it to be September. It should not be like so much that the department has done and slip from month to month. That is not the right way in which to do things. If you say that you are going to publish on a certain day, that is the date on which you should publish. I find the readiness to accept slippage of that sort, sometimes running into many months, rather distressing—but there we are.
I had one representation this morning from a group or a firm that is anxious that the task force is laying down prescriptive models for community participation. It sees a whole range of other things that it could do, which would achieve exactly the same objective—namely, aligning the interests of the community with those of the investor—which do not appear to be considered at all. It would want to have at least what it calls “shared generation”, in which the commercial operator ensures a proportion of the energy generated from a project is discounted off the energy bills of the houses and businesses in a specified local area. As I said a few moments ago, they have been doing that in France for years with the big nuclear power stations, and it seems to work; it provides precisely the readiness of the local community to host what otherwise might be an unwelcome, large and intrusive investment. It would be entirely appropriate for something like that to be available in these circumstances, so this is a moving scene. The minute that we encompass it in statute, it needs primary legislation or at least amendments to subordinate legislation to widen the scope.
This is unfortunate, but I accept one point that the Minister made. She set out her stall and said that there is a backstop provision in the Bill, so I can now understand why, as she put it, it would send the wrong message if we were now to take it out. I can see that, but perhaps it would have been clever not to have gone down this path at all. We might have relied on the voluntary system to take the whole thing forward and then, if it was not successful, started talking about legislation. However, that is not what has happened. We cannot take this any further this afternoon, but I hope that I have made my views clear.
Baroness Verma
My Lords, the UK oil and gas industry is of national importance: it makes a substantial contribution to the economy and supports around 450,000 jobs. Oil and gas will continue to play a vital part in the energy mix as we transition to a low-carbon economy and will still meet around 70% of our energy demand in 2030. Therefore, it is vital that we maximise our indigenous supply, to put downward pressure on prices, support jobs and maintain secure supplies.
The Government commissioned Sir Ian Wood in June 2013 to review the regulatory regime for the UKCS because, although investment levels are rising and near-term prospects are strong, there are new challenges for exploration and production, and the environment is very different from when production peaked approximately 15 years ago. Production and exploration levels have fallen, and production efficiency has declined.
Sir Ian’s final report was published in February 2014 and included four recommendations for the Government. His independent report estimates that full and rapid implementation of his recommendations will deliver the equivalent of at least 3 billion to 4 billion barrels of oil more than would otherwise be recovered over the next 20 years, bringing over £200 billion additional value to the UK economy.
The Government have accepted Sir Ian Wood’s recommendations and last week published a formal response setting out their plans for implementation. The government amendments before the Committee are the first vital step in implementing those recommendations and will send a clear signal of the changes required to industry practice and the role of the regulator to deliver the benefits he sets out in his review.
Amendment 95ZA seeks to put the overriding principle contained in Sir Ian Wood’s report into statute, which is maximising the economic recovery of offshore UK petroleum. This is to be achieved, in particular, through the development, construction and deployment of equipment used in the petroleum industry and through collaboration among holders of petroleum licences, operators under petroleum licences, owners of upstream petroleum infrastructure and those planning and carrying out the commissioning of upstream petroleum infrastructure.
The Government and industry should work together to maximise the economic recovery of offshore petroleum from the UK. Because of the continually changing nature of regulation, the developing needs of exploration and production in the North Sea, and changes in technology and approaches, we think that the concept of MER UK is something that itself is likely to change over time. We therefore do not think that setting out the meaning of “maximising economic recovery” in primary legislation is desirable, as greater flexibility is required.
We take the view that this is better achieved through a strategy which can adapt to new challenges and the evolving needs of oil and gas regulation in the North Sea. The clause therefore requires the Secretary of State to produce a strategy for enabling the principal objective to be met and places a duty on the Secretary of State to collaborate with industry and carry out his activities in accordance with the strategy. The clause also places duties on petroleum licence holders, operators, infrastructure owners and associates of those persons to comply with that strategy. There is also a duty on those planning and carrying out the commissioning of that infrastructure. The Secretary of State is under a duty to lay before Parliament a report at the end of each reporting period on the extent to which relevant persons have acted in accordance with the strategy.
The second main provision, set out in Amendments 94B and 95ZB, provides the Secretary of State with the power to raise a levy from industry to help fund the costs of regulating this sector. This is consistent with the user pays principle and the Government’s belief that those who benefit from a service should ultimately pay for it. The power is circumscribed in a number of respects. The total amount of the licensing levy payable cannot exceed the costs of the Secretary of State carrying out his relevant functions. The levy cannot be used to recover costs in respect of areas in which a charge is payable under the Gas and Petroleum (Consents) Charges Regulations 2013 as those regulations stand when this provision comes into force. To ensure the costs are proportionate, the clauses also allow for different amounts to be charged in respect of different licences.
Finally, the levy is subject to a three-year sunset clause, which will mean that the levy arrangements are reviewed over that timeframe to ensure the system put in place is fair, effective and efficient in terms of its administrative burden. As set out in the government response to the Wood review, published last week, the Government have committed to contribute £3 million per year to the running costs of the OGA from 2016-17 for five years. This is to demonstrate the Government’s commitment to the tripartite approach to delivering MER UK and a recognition of the importance to government that the OGA is well funded from the outset. The levy will, of course, be net of this funding received from government.
For the avoidance of doubt, noble Lords should note that in due course the Government intend to set up the regulator as an arm’s-length body in the form of a government company. However, in the interim, the body will be established as an executive agency. Therefore, for the present, the legislation refers to the Secretary of State.
The other government amendments in this grouping, Amendments 95ZC, 96ZB, 97A and 98AA, are technical in nature and I do not propose to spend too long on them. Suffice to say that these clauses deal with consequential provision, the parliamentary procedure in relation to regulations, territorial extent and commencement. Amendment 95ZC amends the scope of the power in Clause 28 so that it applies also to the clauses dealing with maximising the economic recovery of UK petroleum, the levy on holders of certain energy licences and the relevant schedule. Amendment 96ZB amends Clause 29 so that if we amend the reference to the Gas and Petroleum (Consents) Charges Regulations 2013 as set out in the primary legislation, we would have to use the affirmative procedure. Amendment 97A is required because the Wood review amendments are to have GB extent. It also contains an amendment in relation to the extent of the Extractive Industries Transparency Initiative. Amendment 98AA relates to commencement in respect of the Wood review provisions and the Extractive Industries Transparency Initiative.
The Government have worked at a furious pace to bring forward the measures for this Bill. However, in doing so, we have not yet been able to publish the regulatory impact assessment which normally, although unfortunately not always, would accompany the introduction of the relevant provisions. It is our firm intention to publish our assessment of the indicative range of potential costs and benefits of these powers prior to Report.
I hope it will comfort noble Lords that the industry is supportive of Sir Ian’s recommendations and has called on the Government to implement them timeously. The policy intent is to reduce regulatory burden, empower a stronger, more capable regulator that can mobilise and catalyse, and enhance the efficiency and co-ordination of activity in the UK continental shelf. The clauses we have put forward in the Bill are a key part of what is required to implement the recommendations. I beg to move.
Lord Jenkin of Roding
My Lords, I give an unreserved welcome to these new provisions. When Sir Ian Wood’s report was published last February, and the industry had had time to absorb its messages, there was almost universal support for his recommendations. I think my noble friend said that the Government have worked at a furious pace, and I recognise that. However, I wish to make two points. First, I am surprised to be told by the industry’s representative body that it was not consulted on the terms of these government amendments. It states that the industry,
“has not been consulted about the nature and format of these MER UK amendments”.
I stress as strongly as I can that in the next stages of carrying this forward—working out the strategy, dealing with the details and all the other matters which will flow from this—the Government simply must regularly consult the industry; otherwise, the good will that has been attracted by the evident swiftness in accepting a very complex and detailed report will evaporate if there is a feeling that somehow the Government are charging ahead and not taking account of what the industry wishes to say. I am sure that my noble friend will give me a very firm commitment that the Government will consult the industry on any further steps.
My other point is based to some extent on my experience as a long-standing member of various voluntary bodies and other organisations. Some years ago, I chaired an Anglo-Norwegian seminar for the Foundation for Science and Technology. The seminar was held at what was then the Institution of Electrical Engineers and was attended by the King of Norway, the Duke of Edinburgh, the managing director of BP—my noble friend Lord Browne of Madingley—and the chief executive of Statoil. A very high-level discussion took place between the British and the Norwegians on not just the North Sea but, of course, the Barents Sea. It was a fascinating morning and I certainly learnt a great deal. I chaired much of the meeting and the noble Lord, Lord Broers, chaired another part. At one point, one of my honourable friends from the other House asked the two chief executives—my noble friend Lord Browne and the Statoil CEO—what their highest priority was. The answer was, “fiscal and regulatory stability”. They make long-term investments and changes in the tax system or the regulatory system do enormous damage in undermining willingness to invest.
That event was followed, a week later, by the then Chancellor of the Exchequer, the right honourable Gordon Brown, imposing a substantial additional tax on the industry in the North Sea, which caused huge dismay. Other Governments have done the same in the past, so it was not unique, but it was a remarkable example. Having been told that the highest priority was stability, the Government made a significant change on that sort of thing, with no notice. It really was a very astonishing response.
Russian Gas
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, my noble friend is absolutely right. It is about concentrating our minds. This issue has focused everybody’s minds. He is right that we need to do much more to press our partners. The G7 energy Ministers are meeting again in June to commit to immediate actions. Among those will be emergency plans for the winter of this year and we will be looking at how we can offer assistance to those countries that want to have greater dependency on their own natural sources.
Lord Jenkin of Roding (Con)
My Lords, is not the Question of my noble friend Lord Higgins extremely timely given yesterday’s publication of a very important report by the Economic Affairs Committee? It made the point that the rapid and effective development of shale gas in this country is one of the real steps that we could take to reduce Europe’s dependence on Russian gas. Can we assume an early acceptance of the very important recommendations of this report?
Baroness Verma
My Lords, my noble friend is absolutely right. The report will be considered fully but we agree with my noble friend that shale gas will play a huge part if it can be explored properly and we get from it the full potential that we expect.
Energy: Gas Storage
Debate between Baroness Verma and Lord Jenkin of Roding(10 years, 12 months ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Jenkin of Roding (Con)
My Lords, does my noble friend accept that the real case for more gas storage is to protect this country from spikes in the world gas price?
Baroness Verma
Indeed, my noble friend raises a very important question. That is why, through the Energy Bill, we have tried to ensure that we support home-grown energy. We need a mix of energy and we need it to come from various sources. That is the only way we will be able to tackle what we see as increasingly global prices.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, I thank my noble friend Lord Jenkin for his amendment. Both the electricity capacity regulations and the capacity market rules form the legal framework that will enable the introduction of the capacity market. The capacity market rules will be subsidiary to the regulations, for which the Secretary of State will continue to have responsibility.
Much of the content of the capacity market rules will comprise provisions of a technical and administrative nature, designed to supplement the regulations and ensure the efficient running of the capacity market; for example, the rules will set out how the delivery body is to conduct capacity auctions and the pre-qualification process, as well as its duties to maintain a capacity market register and carry out monitoring and testing.
Given the technical and administrative nature of the rules, we therefore expect changes usually to be of a minor and technical nature, with the primary purpose of ensuring the efficient operation of the capacity market. It is important to make the duty to consult on those changes proportionate, and to get the balance right between consulting widely and implementing the change within an appropriate timeframe.
Potential capacity providers may not necessarily be affected by a proposed rule change in the same way as existing capacity providers; for example, existing providers will have rights or obligations under the capacity market that might be affected by a change in the rules. I am therefore of the view that potential capacity providers should not be added as parties that the authority must consult on every proposed change.
Nevertheless, it is important that if the authority were to propose a significant change to the rules that affected a wider range of parties, consultation on that change should go beyond existing suppliers and capacity providers. I therefore reassure my noble friend that we expect the authority to consult more widely, as appropriate, for any significant changes to the rules that might affect a wider range of parties, such as prospective capacity providers. This is reflected in the draft electricity capacity regulations 2014, published for consultation in October, which would oblige the authority also to consult the Secretary of State, the delivery body and,
“such other persons as the Authority considers it appropriate to consult”.
The authority will be producing guidelines on the process it intends to follow for making changes to the capacity market rules, including its processes for consultation and for considering rule changes proposed by a third party. The authority intends to publish these draft guidelines next spring before finalising them, allowing all potential capacity providers the opportunity to comment on them.
I hope that my noble friend has been reassured that the consultation provision in the Bill is not exhaustive and that the authority can, and will, consult more widely where appropriate. I hope, therefore, that he will withdraw his amendment.
Lord Jenkin of Roding
My Lords, I am extremely grateful for the support from the noble Baroness, Lady Worthington, and it is very nice to know that if I had decided to divide on this I would have had her party with us. However, my noble friend has indeed been reassuring. I entirely accept that all these people should not be consulted on every minor change, but she has given us a clear assurance that, on anything of any significance, both the department and the regulator will consult all those who might reasonably expect to be affected. On that basis, I am happy to withdraw the amendment.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
Lord Jenkin of Roding (Con)
My Lords, I shall be extremely brief because I sense the House would like to come to a conclusion on the amendments.
I listened to the noble Lord, Lord Whitty, with some astonishment. It was as though we had not even had a debate about fuel poverty in Grand Committee. I reread that debate and his first words were that he thanked the Minister for having brought fuel poverty into the Bill. You would not have guessed that from what he said this afternoon.
I have much more sympathy with the points made by the noble Lord, Lord O’Neill, but he, too, had his words of congratulation in Grand Committee. He said:
“The amendment goes some way to mitigate concerns that have arisen about that. It sticks in my craw to say this but the Government must be praised for obtaining support for the measure from Derek Licorice, the chair of the Fuel Poverty Advisory Group, and Jenny Saunders of the NEA”.—[Official Report, 11/7/13; col. GC 135.]
One must recognise Clause 136 is a considerable step forward. In Committee, I said that it was very worthwhile. Of course, the meat of this is going to be in subordinate regulations. We shall obviously want to watch that very carefully indeed. I totally understand the argument that my noble friend on the Front Bench advanced for not putting all the detail into the Bill, but wanting it in the regulations.
The impression I was given by the noble Lord, Lord Whitty, was that the Government were not doing anything for the fuel poor. In fact, he has had a copy of the letter that was sent to all of us from my noble friend on the Front Bench setting out the details of fuel poverty spending. The total resources spent in 2010-11 at 2012 prices—these are common prices all the way through—on fuel poverty spending was £821 million. The current year has gone up, at constant prices, to £841 million and the next year the estimate is £845 million. That does not take account of the fuel allowance, which is paid under the social security arrangements. These are arrangements under the carbon emissions target, under the energy company obligation, the warm homes discount and so on, which are specifically aimed at the poor. So I rather resent that.
I have one question for my noble friend. John Hills’s report made the hugely important point—indeed, it has been referred to earlier in the debate—that it is our uninsulated homes, particularly for poor people, which are the biggest single cause of cold homes and fuel poverty. He quite rightly says—and this has been widely welcomed—that we must change the definition to take account of that. What I hope to hear from my noble friend is what is now happening to our main programme, the Green Deal, which is supposed to be the main instrument for increasing the amount of insulation of homes. One has heard gloomy tales that so far very few people have been able to take advantage of that. What is happening on that? We must know. To my mind that is the most important thing we can do to reduce fuel poverty.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I start by thanking all noble Lords for a very full and informed debate. I thank my noble friend Lord Jenkin for reminding the House of the warm welcome from the opposite Benches for us taking forward this measure. It is really important that we all agree that something must be done. What has been done in the past has not been enough. We need to be working far more constructively together to get solutions, particularly for those who are most vulnerable and least able to respond. I also thank my noble friend Lord Deben. He is absolutely right: any measures that we take here will have an impact somewhere else in the world. It is really important that we are mindful that this Bill is in part there to help decarbonisation. The bigger picture is to play our role in helping other countries, which can look at how we are putting those measures in place.
I also thank the noble Lords, Lord Whitty and Lord O’Neill, for their amendments, because they enable me to clarify a little further points that I made in Committee so that they feel reassured that this Government really take seriously the issue of fuel poverty. We take the issue no less seriously than the previous Government did, but the measures that were put in place were not working well enough. We need to make sure, therefore, that what we are doing gives better results.
Noble Lords have rightly highlighted the seriousness of fuel poverty; it is because of this that we are committed to tackling this. This is why we made the amendments in Committee which will set a new target and put in place a new strategy for tackling the serious issues around fuel poverty. This framework will allow us to maintain a concern for fuel poverty beyond the current date of 2016. That concern needs to be set out in legislation. However, the right balance must be struck between what is set out in primary legislation, what is subsequently laid out in secondary legislation and what is included in the strategy, to maintain an appropriate use of parliamentary time and level of government accountability.
I turn to Amendments 104C, 104D, 104E, 104F and 104G, which would put a specific target for fuel poverty in the Bill, and limit the changes that can be made to the target as well as proposing a review of that target every two years. We proposed setting the target through secondary legislation as we felt that this struck the right balance between the certainty of legislative targets and the need for flexibility in the future. The flexibility will, for instance, be important to reflect changes in the way energy efficiency is measured over time. The setting of the target, and any changes to it, will be subject to full parliamentary debate and the importance of that debate is why we have proposed that these are subject to affirmative resolution by both Houses.
We know from Professor Hills’s independent review that the way in which we understand the problem, as well as the best ways of tackling it, can change over time. Primary legislation is not the appropriate vehicle, given the importance of a nuanced, flexible approach to tackling fuel poverty.
I agree with noble Lords that we must be ambitious if we are to be successful in tackling fuel poverty, and the strategy must be a comprehensive one. However, it is neither sensible nor appropriate to put this level of detail into primary legislation. We will bring forward proposals on both the fuel poverty target as well as the strategy in due course, both for public consultation and, subsequently, for a full debate by both Houses.
In the mean time we will continue to deliver policies to tackle one of the main causes of fuel poverty, which, as noble Lords have already mentioned, is living in cold, draughty homes. The energy company obligation is set to deliver permanent energy savings in 230,000 households by the end of the year, including for the hardest-to-treat homes. We anticipate the ECO affordable warmth and carbon saving communities obligations should generate investment in home thermal efficiency improvements equivalent to around £540 million per year. As a result of the ECO, we should see more than 60,000 boilers—which were mentioned by the noble Lord, Lord O’Neill—being installed in fuel-poor homes, as 60,000 have been installed since the policy was launched in January.
Energy
Debate between Baroness Verma and Lord Jenkin of Roding
Lord Jenkin of Roding (Con)
My Lords, I thank my noble friend for what she has said, but might I press her a little further on the point with which she ended her reply to the noble Baroness, Lady Worthington? I refer to the question of the competition reviews. The Statement says that although much has already been done, the Government are ready to do more, and then goes into detail about annual reviews of the state of competition in the sector. If, as seems entirely possible, one of the results of a review is that the regulator, Ofgem, for example—I agree with my noble friend that we need to build on what is already in place and not try to create something entirely new—needs strengthened powers to make competition more effective, how might Ministers expect to deal with that? As the Secretary of State said in his Statement:
“If abuses are found, they must be addressed”.
Would it not be wise to take powers now in order to avoid having to introduce fresh primary legislation? Interestingly, EDF has come out in only the past few minutes to say that it would welcome a review, because that will help to restore trust in the system. If that is indeed likely to be the result, would it not be a good idea to act fairly quickly?
Baroness Verma
My noble friend is absolutely right. The purpose of the review is to enable the regulators, led by Ofgem, to see what needs to happen in order to strengthen competition. They should be able to look carefully at whether there is transparency or not and accountability or not. What we need to do is wait for the competition review to take place, conduct a consultation on the review, feed into the review and then comment on it. It would be wrong for the Government to comment at this moment in time. It is right to get the competition review under way by having all three regulators look at the position carefully. They have the expertise and they know what they are looking for. If they need extra powers, it is for the Government to ensure that we support them by ensuring that those extra powers are put in place.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, while I wait for some inspiration to wing its way down to me, I will continue and respond later to the noble Baroness. I recognise what my noble friend Lord Jenkin and others have said about how liquidity reforms benefit consumers. These reforms make it easier for independent suppliers and new entrants to access the wholesale market. They will increase competitive pressure in the retail market, which will benefit consumers in terms of downward pressure on bills, greater choice, and better service, which is what I know all noble Lords want.
My noble friends Lord Deben and Lord Jenkin, and others, mentioned Ofgem’s liquidity proposal. We want to make the energy market as competitive as possible. An increasingly level playing field for independent suppliers and generators is precisely what will help drive competition, which delivers better value for consumers and business. Ofgem’s proposal to increase transparency in the way electricity is traded will give independent generators a foothold in the UK market and encourage new players to invest.
While I am waiting for inspiration, which has not quite arrived yet, I will touch on the proposals the noble Baroness, Lady Worthington, has mentioned on the price freeze. We cannot see the Labour Party’s proposals solving the problems of competition. What we see is that we will get price hikes before and after the freeze. What we need is to get a better understanding of where the Labour Party is coming from when it says that it wants to reset the energy market, because we do not know whether that is just jingoistic terminology or if there are some proposals in place.
The inspiration I was waiting for has arrived. We are engaging with industry. It said that it was pleased with our proposal for a higher cap in the first auction. I suspect that does not quite answer the noble Baroness’s question, so perhaps I will come back to her on that.
Lord Jenkin of Roding
I am listening with very great care to what my noble friend has said because this is all very important. She says that she has met the representatives of the industry and of their bankers and funders. Is she now saying that she will take account of what they said and of the three points they raised? My noble friend has mentioned the length of the contract; they say it must be not less than 15 years. There is the question of the penalties, which the noble Baroness, Lady Worthington, has mentioned. There is then the question of a cap. All three have to be right or, however much the noble Baroness, Lady Verma, says she wants competition she will not get in the new entrants and the independent generators.
Baroness Verma
My Lords, as I have said, I have taken very seriously what the independent generators and others have said to me, as well as what noble Lords have said. I think, however, that what our proposals are laying out answers many of these fears and the concerns of those generators. We of course agree that there needs to be greater competition. That is what I think this Bill will help to achieve.
I return to the penalties that the noble Baroness and my noble friend have mentioned. We have proposed cutting penalties between 101% to 149% of capacity payments in any year. We are aware of concerns from independent generators at the level of penalties, but it is crucial to balance investability against protection for consumers. The right thing is to focus our efforts on concrete actions that will make a difference by enabling low-carbon generation to compete, by helping gas-fired generators and other reliable capacity providers to remain economic and compete, and to bring reforms to the wholesale and retail markets.
I therefore urge my noble friend to withdraw his amendment. I hope I have demonstrated that the Government are taking clear action to increase competition at the same time as actively reviewing what more can be done.
Lord Jenkin of Roding
My noble friend went very fast, and at my age it is not always easy to hear everything that is being said. The Leader of the House is waiting to make his Statement about the European Council. I have the impression that she has been impressed by the people whom she has met and the discussions that she has had with me and others on this matter. She has given me every impression that she understands that, if these people are going to compete effectively, they have to be able to raise the finance in the market to do it.
The initial terms which the Government pointed out, as originally indicated, would apply to them would have made them say, “Well, we cannot raise it. We only have 10 years? It is impossible”. There are various other things, and we have mentioned the penalties and the cap. I understand that my noble friend has given an undertaking—perhaps she will deny me if that is not right—that she will consider very carefully what those independent generators have said and the terms and conditions that they will have to have if they are going to enter the market. If they do not, whatever my noble friend has said about competition, it will not happen.
Baroness Verma
My Lords, I do not want to leave my noble friend in any grey area. I have listened very carefully to him, as I always do, but I think that the proposals I have laid out will respond to him and to those independent generators. I think the proposals and the Bill and what I am taking forward do answer those concerns.
Lord Jenkin of Roding
My Lords, I am going to take my noble friend’s word as what I think she is intending to mean. She is not giving any guarantees, but she does apparently understand the case that has been made if the competition is going to work through the capacity market in the way in which the Government have said it would. She has been told very firmly that unless she changes the conditions it will not work. She has given me the impression—and, I hope, other noble Lords as well—that she understands that and will continue talking with a view to getting acceptable conditions. If that is the case, it would seem to me to be quite wrong that I should take the opinion of the House. In those circumstances, I beg leave to withdraw the amendment.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, I will try to get the passion back into my voice. I was responding to my noble friend Lord Jenkin. If I can just give him a word of comfort: the current Ofgem and National Grid consultation will most likely focus on ensuring that some plant is held in reserve. I know that my noble friend is concerned that there will not be enough capacity in reserve. This is a short-term intervention to bring back already mothballed plant. The capacity market is a medium-term intervention that we hope will incentivise investment. We want to ensure that the market itself stands on its own in the coming years. We are trying to assist enough capacity on the grid.
I forgot to respond to the noble Lord, Lord O’Neill, and the noble Baroness, Lady Worthington, about the consultation on the SIs. We intend to consult from October on the detailed implementation of EMR. This will give noble Lords an opportunity to scrutinise the detail of the EMR ahead of Report. Further detail of our plans for secondary legislation can be found in the memorandum that we recently sent to the Delegated Powers and Regulatory Reform Committee. I hope that having given my noble friend that extra response, he now feels that he can withdraw his amendment.
Lord Jenkin of Roding
My Lords, I began my speech a few minutes ago by saying that I found the Minister’s response very disappointing, and I do not think that anything she has added since then alters my reaction. I am grateful to all those who took part in the debate, and particularly the points made by the noble Baroness, Lady Worthington, that it is very difficult to know how this will work until we have details of the statutory instrument that will implement it. I entirely endorse her demand that this must be available before Report so that we can make sense of it. She also agreed that we may be seeing more mothballed plants by 2020. That is an estimate that I am not in a position to either endorse or deny. She is also absolutely right that we have to get the demand side response appropriate, and I know that the Government are working on that.
The Minister said something with which I entirely agree: there must be no payments in advance. We cannot ask customers to pay for something before it actually happens. I never suggested that. If she looks at Hansard eventually she will see that I indicated, “provided the market payments can be made as soon as plant is available and commissioned”. That disposes of that argument entirely. I am not for a moment asking that payments should be made in advance. That is not how the system is supposed to work as I understand it. My noble friend also seemed to imply that we could not have different auctions for different years. For the life of me I cannot understand why it should not be possible to have an auction for people who would be able to bring back mothballed plant within, say, 18 months. If that were the conditions of the auction, the firms that have mothballed plant and could bring it back within 18 months would be able to bid for it. That does not mean that there would not be another auction, even perhaps operating in parallel. There will not be many takers in the early years. We were told the other day that contracts for CFD might be over a period—was it 60? That is the sort of numbers we are talking about. It should be perfectly possible to have different auctions for different periods with the payments made appropriate to the date of the auction. This needs to be examined more carefully and we should not just accept my noble friend’s assertion that it would simply muddle up the whole auction process. I do not believe that for a moment. We can be a great deal more subtle than that.
Baroness Verma
My Lords, let me assure my noble friend that mothballed plant will be able to participate in the capacity auction.
Lord Jenkin of Roding
Yes, but it will not be able to get any money until 2018-19. That is the point of this amendment. If they can bring the plant back and have capacity available for meeting the demand and operating under the SBR before that, and it is available and commissioned, why should they not get their money? Why do they have to wait another two years?
Baroness Verma
My Lords, let me again assure my noble friend that those who are successful in the capacity auction held four years out will receive a capacity agreement which guarantees them a steady payment in the delivery year.
Lord Jenkin of Roding
That is completely new. Does the Minister mean in advance of 2018-19? No, she is being advised from behind her. She may not have got that quite right.
I think that there is sufficient confusion on this that we must wait until we have the full details of how the scheme is going to work. That will require our having the details of the statutory instrument that implements it. I reserve my right to return to this matter.
Baroness Verma
No, my Lords. I have pointed out that we intend to consult from October on the detail of implementation. I have also referred to the secondary legislation. Further detail of our plans for secondary legislation is in the memorandum to which I think noble Lords have access.
Lord Jenkin of Roding
What my noble friend Lord Deben has said merely reinforces the condition that we will have every right to return to this matter on Report, because we are having to debate it in Committee with less than half the necessary information. I still think that there is a perfectly valid way through this, which is to have different auctions for different periods between the auction and the payment. For the life of me, I cannot understand why that could not happen. But it needs to be examined: there may be absolutely indisputable objections to it; at the moment, they have not been pointed out to me. However, I think that we have said enough and I beg leave to withdraw the amendment.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, I thank my noble friend Lord Jenkin for his amendment. Amendment 53ZA proposes that providing capacity should take account of projected growth over a 10-year period. I understand that he has proposed it because of concerns about the long-term capacity of electricity networks and the ability of distributive network operators to make strategic, long-term investment decisions. I should make it clear from the outset that the capacity market is not intended to drive investment in network capacity. Rather, it is designed to ensure that there is sufficient longer-term investment in electricity capacity, including generation and other forms of capacity, such as demand-side response.
In March, Ofgem published its strategy decision for electricity distribution network price control. That explained that price control had been designed to encourage distribution network operators to provide a high level of service for connections while maintaining a reliable network and delivering value for money for existing and future customers. The decision also explained that flexibility has been provided for DNOs to submit a case for strategic investment in their business plans on a project-by-project basis. Similarly, the Electricity Act 1989 already provides some flexibility for early investment—for example, the distribution network operator and its customer can make an agreement that allows an upfront user commitment agreement between the DNO and a customer who wants strategic investment. I understand that, in the case of UK Power Networks and its customers in the City of London, this is already happening.
It is vital that investment in our networks continues at a pace that supports our future energy needs. None the less, we must be mindful that there will be a balance to be struck to ensure that consumers do not pick up the costs of unused or underused assets. For this reason, it is right that Ofgem and the network companies continue to consider carefully where investment ahead of need is proposed.
My noble friend also makes an important point about ensuring that decisions on capacity of electricity supply are made with due regard to the long-term outlook. As such, for the capacity market, the Government have committed to publishing a delivery plan every five years and producing annual updates to that plan. These plans will include long-term forecasts of electricity demand and supply, and will inform the amount of capacity contracted through the capacity market.
I hope that my noble friend finds my explanation reassuring. Before I ask him to withdraw his amendment, I shall respond to the noble Baroness, Lady Worthington, on her questions about how the capacity market works and how it is envisaged. A forecast of future peak demand will be made for four and a half years ahead of the delivery year in which it must be available. The amount of capacity needed to ensure security of electricity supply will be acquired through a competitive central auction four years ahead of the delivery year. Generation and non-generation approaches such as demand-side response will be able to participate in the capacity auction. All generation plant, including existing plant, will be eligible to participate in this auction, with some exceptions such as low-carbon plant receiving CFDs.
Providers of capacity successful in the auction will enter into capacity agreements committing to providing electricity when given notice in the delivery year in return for steady capacity payments or will face financial penalties. The costs of the capacity payments will be shared between electricity suppliers in the delivery year. That is a brief outlook of how it will work but I hope that the noble Baroness is reassured that there is plenty of detail. She also referred to the Delegated Powers Committee. As she is aware, we have submitted extra information to the committee and it is now looking at that. We will then look at its recommendations but until that point it would not be right for me to comment on them. With that, I hope that my noble friend will withdraw his amendment.
Lord Jenkin of Roding
I am very grateful to my noble friend for her careful reply to the amendment. It is clear that she understands the nature of the problem but somehow there has to be a greater understanding between those who represent the interests of developers and other business people in the City and elsewhere, and those who are concerned, as she said very properly, not to add additional costs on consumers unnecessarily. I hope the discussions will continue because it seems to me that my noble friend has spelt out the problem very clearly as the Government see it. As I have said, we have had the consultation with my noble friend Lord Deighton. It is also clear from what my noble friend Lord Deben said that this is a wider problem than just the City and the commercial districts. There is something here which needs to be looked at. Those who have been advising me on this will certainly read very carefully, as I will myself, what the noble Baroness has said.
On the wider question asked by the noble Baroness, Lady Worthington, I have had an invitation, as I suspect have others, to a briefing to discuss the document published yesterday, the Consultation on the Draft Electricity Market Reform Delivery Plan. I think this will be on Monday and I am very much looking forward to it. In the mean time, I mentioned that I had not had the full printed copy and, mirabile dictu—sorry, one is not allowed to use Latin—or, amazing to say, it turned up on my desk. I am extremely grateful to the official who made that possible, so I will have some interesting reading over the weekend. Having said that, I am very pleased to withdraw the amendment.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, these government amendments propose a change to the Warm Homes and Energy Conservation Act in order to put in place a new, rigorous and flexible framework for measuring the Government’s progress in tackling fuel poverty in England. As we move forward with ensuring a safe, low-carbon future we must ensure that everybody is able to benefit from our policies.
Last year, Professor Hills completed his independent review of fuel poverty and concluded that we had been measuring the problem in the wrong way. Our concern about how we measure fuel poverty has been driven by wanting to address the problem more effectively.
High levels of fuel poverty a decade or so ago were masked by official figures that suggested the problem had been solved. The sensitivity to energy prices of the definition, creating an ever changing picture of the households who are fuel poor, makes designing and implementing effective policies extremely difficult. We want to learn the lessons of this.
We will therefore be adopting the new definition of fuel poverty proposed by Professor Hills. This finds a household to be fuel poor if it is below the official poverty line and if it has higher than typical energy costs. It is a more accurate measure of the problem. It brings the major advantage of telling us not only how many fuel-poor households there are but how badly affected each household is. This will help us target policies much more effectively, as our recently published Fuel Poverty: A Framework for Future Action attests. Although this new definition is rightly at the centre of our proposals, it is clear that a single indicator is not sufficient to give us an understanding of this complex problem. We therefore intend to monitor fuel poverty through a number of key indicators.
One of the important conclusions of the Hills review was that fuel poverty is a long-term structural problem, requiring an ongoing effort to mitigate it. The current framework does not reflect this, focused as it is on ensuring that no person lives in fuel poverty, as far as reasonably practicable. We want to address this problem with the current framework by adopting a new target focused on improving the energy efficiency of the homes of the fuel poor. In this way we can ensure that our efforts are directed towards a key cause of high energy bills and make a real difference to people who are struggling to keep warm.
Amendment 50J therefore sets a duty for the Secretary of State to have an objective to address fuel poverty and for the details of this new target to be specified in regulations, rather than in primary legislation as it is currently. The regulations must set out the form of that target, the level that will be achieved and the date by which this will be done. The secondary legislation must be brought forward within six months of the provisions entering into force. The amendment also maintains the duty on the Secretary of State to have in place a fuel poverty strategy but makes this duty consistent with the new objective.
Amendments 56A and 58 are minor provisions to be clear on the territorial extent of the amendments, where our proposals would apply to England only, and the commencement date for the provisions, which will be two months after the Act receives Royal Assent.
While we want to give the new target statutory backing, it would not be wise to set it in primary legislation. We need to be flexible in our approach to fuel poverty as we reform the electricity market, seek to drive the uptake of renewable heat in our homes, and bring about major improvements in energy efficiency standards through the Green Deal and ECO. We therefore think it appropriate for the details of the target to be set in secondary legislation, subject to parliamentary debate and the affirmative resolution of both Houses.
As part of this change, we need to be realistic about how quickly we can make progress. The current target is 2016. The interventions necessary to address the problem as we understand it cannot be undertaken within that timeframe. The needs of the fuel poor must continue to be championed after that date. A sensible approach for the future is to align our efforts on fuel poverty with the action we are taking more widely in tackling climate change. As my noble friend Lord Deben knows, the Committee on Climate Change already has a responsibility to monitor the Government’s approach to fuel poverty. The two issues go hand in hand.
Our amendments will allow us to bring forward proposals for a new target, including its precise form and level, and a date for its accomplishment. We will ensure that the determination and insights of those on the front line, working day in and day out to help alleviate fuel poverty, are reflected in our approach.
We want to make sure that the target bites. Our amendments therefore retain the key primary duty to have a fuel poverty strategy that sets out how we will meet our future target. Our amendments require us to set interim targets that will ensure that we stay on track along the way. Our recently published Fuel Poverty: a Framework for Future Action already sets out a direction of travel and underlines our commitment to tackling fuel poverty in a meaningful way.
I welcome the support that our announcements and proposed amendments received from the chair of the Fuel Poverty Advisory Group and the chief executive of National Energy Action, given their expertise on the issue. I understand that there may be some who are concerned by a significant change to the long-standing fuel poverty framework set out in the Warm Homes and Energy Conservation Act. By fixing a framework for the long term, the amendments ensure that, far from ceasing to be of concern in 2016, fuel poverty will remain high on the Government’s agenda throughout the delivery of our ambitious programme for energy efficiency and the energy sector in the UK.
Our amendments provide for an ongoing focus on helping low-income, vulnerable households keep warm, and will help them stay ahead in the energy efficiency market rather than fall behind. I trust that noble Lords will recognise the seriousness of our intentions to make real progress in tackling this long-term problem and will support the amendments. I beg to move.
Lord Jenkin of Roding
My Lords, I will make a few comments on what my noble friend said. The first is that we are extremely grateful to her and to the officials working with her for the briefing that some of us had fairly late last evening. All this was sprung on us at fairly short notice. The White Paper, Fuel Poverty: a Framework for Future Action, which is an immensely worthwhile document, contains a wealth of material. It is not always easy in a debate of this kind to do justice to it. It has been backed up by a paper produced in response to the consultation.
As the noble Lord, Lord Whitty, said in our debate on Tuesday when we discussed the problem of bills, not all of this is new. We have been aware of the Hills report, to which my noble friend referred, and the consultation paper. There were a good many responses to the consultation, which were referred to in the Government’s response. There is a wealth of material from which we can make an assessment of what the measures are likely to produce.
The first thing I will say on this is that the Government have been wise to recognise that the methodology of the previous fuel poverty target—how it was measured and what the appropriate responses were—has now really been shown to be wanting. That has inevitably meant that, in the light of Professor Hills’s report, that target and the methodology that accompanied it must be changed. I welcome very much what the Government now propose as the approach to this. It is not just a question of energy prices and relative incomes. There is far more to it than that. Without going into all the details, because I am sure noble Lords will have made their own studies of this, it is clear that there is much more to be done. Indeed, it is only if you measure the problem in an appropriate way that you can really devise and decide on the necessary measures to deal with it. That is an approach which I warmly welcome. If it continues to be measured in the wrong way, of course the authorities and the industry would be tempted to continue to use what have turned out to be often very ineffective policies to deal with this, and would give a false view of the size and severity of the problem.
This is a welcome new approach. I have read some of the documents which have been issued in the past day or two by the interest groups which represent the fuel poor. Although some of them wisely recognise the merits of the new approach, there has been an almost instinctive reaction of, “Well, you are abandoning the targets and not putting anything in their place”. My noble friend has indicated that her amendment will in fact lead to new targets. The other complaint is that it is not now going to be in statute, it will be in regulations. The fact is that you are going to advance this policy properly, it will have to be dealt with over time. That can only be done by regulations. My noble friend’s amendment would introduce the power to do so. I have never read an amendment which includes the phrase “The Secretary of State must” so many times. This will be a considerable reassurance to those who have been anxious that the Government are in some way weakening in their policy on this. They are not. It is a very real social policy leading to considerable hardship. Anyone who has represented constituents recently or in the past will be aware of the problem. Of course, it has got so much more difficult with rising prices.
Some of the methodology which stems from the Hills report is distinctly complicated. I found myself on Tuesday night trying to understand some of the charts in the White Paper. A particular chart on page 18 required having a fair number of towels around one’s head to try to understand it; I think that I fell asleep over it. The Minister’s officials were able to describe the meaning of some of this in our meeting yesterday. It illustrates the complexity of the problem that has been dealt with. There are all sorts of reasons why some households suffer from acute fuel poverty. They need to be examined in all their detail. This is what the department has tried to do with the help of Professor Hills’s report. We shall have to see how successful that is. I had not realised what a difference it makes whether you are connected to the gas grid or not. Yet the figures in the chart show clearly that that is a major factor. If you do not have access to mains gas, you are far more likely to be in serious fuel poverty.
Lord Jenkin of Roding
Perhaps I can help the noble Lord, Lord O’Neill. The point that has been put to me on behalf of the national grid is that it does not yet see what the change in the target would mean for their investment programme. I endorse very much my noble friend Lord Deben’s point that there is now an element of uncertainty. It is that which needs now to be resolved as quickly as possible. I am sure that they will respond firmly to the invitation which has been issued for discussions to take place. Certainly, I do not know and have not been told whether this means investment in different places for different communities. They do not yet know enough about it to be able to make that sort of decision.
Baroness Verma
My Lords, to continue with my responses, the noble Baroness, Lady Liddell, asked about ECO and what was contained within it. Within ECO, energy suppliers will provide fully subsidised measures under the affordable warmth obligation to low-income, vulnerable households. We estimate that around 230,000 low-income households can be supported each year through ECO, so there will be no up-front cost through the affordable warmth obligation to low-income households.
Again, I am extremely grateful for the support of the noble Lord, Lord O’Neill, although I would say that, rather than sticking in his throat, it was a gentle hiccup. Through the Green Deal and ECO we are endeavouring to reach out and get to those households that would benefit the most. Again, I point the noble Lord to the £540 million that is being made available though the affordable warmth obligation and the carbon-saving communities obligation. We also have the warm home discount, with the overall effect that all consumer bills will be lower than they otherwise would have been had these measures not come into place.
The noble Lord also asked about the reduction in government funding for fuel poverty. Funding for fuel poverty has not been reduced over the spending review. Total spending on fuel poverty is being increased and by 2014-15 we expect to see spending on the warm home discount at £310 million and spending on ECO will be at least the £540 million that I said—up around 10% on 2009-10.
My noble friend Lord Deben rightly recognised fuel poverty in poor rural parts of the country. I completely agree with him that we need to make sure that the measurements we take help us to respond to those in rural households facing fuel poverty so that they are also able to benefit from our measures. The average fuel poverty gap in poor rural areas is £558 compared with £361 in other areas. In underpinning the new target, we need to reflect in other strategy how we will approach the fuel poor in rural areas. When it comes to consultation, I hope my noble friend will be able to assist us in that.
My noble friend Lady Maddock asked about the private rented sector and fuel poverty. Again, I recognise as she does the importance of ensuring that we work closely on regulations so that the private landlord sector is not omitted. From April 2018, landlords will not be able to rent out any property that does not meet the minimum efficiency ratings, subject to the provisions already present in the Energy Act 2011.
The noble Lord, Lord Whitty, said that while he sort of welcomed the measures instead of shillings pennies were being dropped. I will try to convince him that rather than shillings we need to talk about pounds being dropped. We recognise that we have to eradicate any kind of poverty but current methods—targets—are not working. Realistically, we need to see how we can reduce it to get to the point of seeing poverty eradicated. I need to make it clear that we are not abandoning fuel poverty targets. We are improving them and enhancing our delivery of meeting them. Our amendments increase certainty that successive Governments will keep this issue at the top of their agendas. This is a cross-party issue. I think all those sat in the Committee today recognise that successive Governments have failed. We need to make progress.
On publishing fuel poverty statistics, I am happy to reassure the noble Lord, Lord Whitty, that we intend to use the Hills fuel poverty gap and publish the relevant statistics. We will also use our annual fuel poverty statistics publication to record figures using the old 10% indicator.
The noble Lord also asked about the operational aspect of our definition. Targeting is always difficult but we hope that the new definition will open up new improvements. We currently use a number of proxies for fuel poverty, such as receipt of certain means-tested benefits. That will need to continue for some time but we know, on the ground, that local authorities and others are using a range of technologies and techniques to identify fuel-poor households. We are currently evaluating the outcome of the £31 million fuel poverty fund that we made available to English local authorities last year, with a view to seeing what works best in terms of targeting.
The noble Lord also asked about devolved Administrations. The measurement of fuel poverty is a devolved issue. The devolved Administrations are able to measure the problem in their own ways. We continue to work very closely with our colleagues in the devolved Administrations and have explained our proposals to them.
To finish on the noble Lord’s question on the total expenditure on fuel poverty, we have recently made available information on our spending on fuel poverty, which is going up. That was in an Answer to a Question in another place, which I will share with the Committee in writing as soon as possible. With that, I hope noble Lords will accept this amendment.
Energy Bill
Debate between Baroness Verma and Lord Jenkin of Roding
Lord Jenkin of Roding
I am extremely grateful to the noble Lord, Lord Whitty, for his kind remarks about the two amendments which stand in my name. It is very important, when you are setting up a board of this kind, to have a proper balance between executive and non-executive members. We are in an interim position concerning the executive members. The chief inspector, Dr Mike Weightman, retired earlier this year, and that was a considerable loss. He established not only a huge personal relationship but an important overseas relationship with the regulator in this country. There is great admiration from many nuclear countries overseas for our system of regulation, and a succession of chief inspectors, not least Dr Weightman himself, have made a major contribution to that.
Obviously, one has to have a strong chief executive and chief inspector, but it is also very important that one has on the board a mixture of executive and non-executive members. My amendment simply prescribes that:
“At least one non-executive member must have experience of, or expertise in, matters relevant to the ONR’s nuclear safety purposes”.
That is self-evident, but it is not in the Bill. I think that that is the right way to do that.
On the other hand, I do not agree with the amendment of the noble Lord, Lord Whitty, that there should be appointments from the NDA and the other body mentioned. They seem to me to be much too directly involved in the work of the board and of the ONR. They are among the regulated, and that is probably not right. There are a number of experts from academia and elsewhere in industry who could fulfil that role without having to look to the Government’s own bodies to provide people for the board. Under my amendment, at least one of them must have experience in the matters which concern the board. That would strengthen the board and the legislation and add to the public reputation of the ONR and its board.
Baroness Verma
My Lords, again, I am extremely grateful to the noble Lord, Lord Whitty, and my noble friend Lord Jenkin for their amendments prompting this debate.
Amendment 38W increases the number of non-executive directors on the ONR board from seven to eight, and Amendment 38X makes a corresponding change. These amendments would result in the ONR’s board having a maximum membership of 12, which is quite large for a relatively small organisation. Amendments 38W and 38X accommodate Amendment 40A of the noble Lord, Lord Whitty, which empowers the Secretary of State to appoint an executive member nominated by the Environment Agency or a member nominated by the Nuclear Decommissioning Authority. Although I fully appreciate the importance of the ONR having a strong working relationship with other regulators and relevant bodies, including the Environment Agency and the Nuclear Decommissioning Authority, such relationships are already in place and we expect them to continue when the ONR becomes a statutory body. The Bill does not prevent persons recommended by those organisations being appointed as non-executives, so I do not feel that the amendments are needed. Consequently, it is not my view that Amendments 38W, 38X and 40A are required.
Amendment 38Y sets out some areas of expertise that the Secretary of State might consider when appointing a non-executive. Nuclear matters, governance, health and safety, and employment are all areas where an ONR non-executive could have expertise, but they are not the only ones. We also need to look at areas such as finance, audit and project management, which are crucial to the effective and efficient operation of any organisation and should not be dismissed.
I do not believe that the legislation should limit the skills that a non-executive can bring to the ONR or fetter the Secretary of State’s ability to make appointments. Nor do I think that persons without a background in such matters are incapable of bringing valuable skills and experience to the ONR. On that basis, I do not believe that Amendment 38Y is required.
Amendment 40B would remove the power of the ONR to pay non-executive members, except for the HSE member, a pension or gratuity. This power helps to enable the ONR to draw upon the widest pool of suitably qualified people as prospective non-executives. It is especially relevant for those with an extensive range of relevant skills and expertise who have reached or are approaching retirement age. Such sums that the ONR might decide to pay must be approved by the Secretary of State, so there will be suitable checks on the ONR’s spending on this front. On that basis, I do not believe that Amendment 40B is desirable.
I now turn to the amendments tabled by my noble friend Lord Jenkin. These concern the expertise and experience held by the ONR’s non-executive directors in the areas of nuclear safety and nuclear security. Amendment 39 is designed to enable more than one non-executive director with security experience or expertise to be appointed to the ONR board, and Amendment 40 requires at least one non-executive to have experience relating to the ONR’s safety purposes.
As drafted, the legislation gives the ONR a skills-based board, ensuring that there is a balance of individuals with the necessary experience and expertise to provide strong governance to a modern regulator. To ensure that the ONR’s security interests are carried out in the context of wider national security policies, the legislation makes it a requirement for the board to have one non-executive director with relevant security experience. The legislation also enables more than one such non-executive to be appointed by the Secretary of State. I therefore reassure my noble friend that the current wording of the Bill does not limit the ONR board to simply one member with security experience or expertise, and on that basis I hope that he recognises that Amendment 39 is not required.
Nuclear safety expertise on the ONR board will be provided, at the very minimum, by the chief nuclear inspector, who will be an executive member. Further executive or non-executive members with nuclear safety experience can be appointed if it is felt necessary. I agree wholeheartedly with my noble friend that in the former chief nuclear inspector, Mike Weightman, we had an excellent, world-class inspector who was globally recognised, particularly given the work that he did post-Fukushima. Due to him, we have strengthened our reputation across the globe as a lead inspectorate. Tribute must be paid to Mike Weightman. His eight years of service have been highly appreciated by us all.
The ONR is an organisation whose role is predominately concerned with safety. The Government are confident that the ONR board will, without specific provision in the Bill, include individuals with the experience and expertise to provide governance in this area. Thus, experience of safety issues will be held not necessarily in one individual but across a number of members, who will bring with them a range of expertise. Therefore, I do not believe that Amendment 40 is required.
I shall just touch on the question asked by the noble Lord, Lord Whitty, concerning the presence of a member from the unions. The ONR board will be a skills-based board rather than being made up of representatives of particular stakeholders. I reassure the noble Lord that the board will not be minus just the trade unions; industry representatives will not be on it either.
I hope that the noble Lord, Lord Whitty, and my noble friend Lord Jenkin have found my explanation reassuring and that they will agree to withdraw their amendments.
Lord Jenkin of Roding
My amendment has of course not been moved so I cannot withdraw it, as I am sure that my noble friend realises. I may study her remarks quite carefully, together with the advice that I have been taking on these matters. I hope that I will not need to return to this on Report, but the advice I had was that people felt pretty strongly that there had to be one non-executive director with experience in the area of the ONR. I am not quite sure whether the Bill gives them the power to do that. We hope that it should be firmly written into the Bill that they must, but I have not moved the amendment so I cannot withdraw it.
Baroness Verma
I am extremely grateful that the noble Lord ended on his last note, because I consider everything extremely carefully, but I agree with my noble friends Lord Deben and Lord Jenkin that we must not be so restrictive on what the ONR could do to enhance its standing in the world. I would like to address the amendments of the noble Lord, Lord Whitty, as they are grouped, so that I can clarify for him the reason why we are taking the position that we are.
Amendment 40C would require that the ONR’s accounts are presented to the Secretary of State and laid before Parliament at the same time as the annual report. The noble Lord, Lord Whitty, asked whether the accounts would be made available. Accounts are already required to be audited and laid before Parliament under paragraph 21 of Schedule 7, and, in practice, the accounts and the annual report will be published together. I hope that that answers the noble Lord’s question on reporting and laying before Parliament.
Amendment 40D would remove the ONR’s powers to borrow. This is not an element of the Bill that it is intended that the ONR would use frequently, and it can be used only with the Secretary of State’s approval. It is certainly not a blank cheque, but there may be instances where the ONR’s work may require extra funding in the short term to achieve a long-term goal, and in this instance I believe that the ONR’s power to borrow money, with appropriate checks and balances, is suitable for an independent public body.
Amendment 40G, on the other hand, would seek to require the ONR to recover the full costs of an inquiry. Laudable though the intention is, we cannot always guarantee that full cost recovery will be appropriate. The costs of some inquiries may not be fully attributable to one or even a group of duty holders. We would not wish unfairly to add extra charges to business for costs not incurred by them.
I am grateful to the noble Lord for tabling Amendment 40K. It would remove provision in Clause 79 for the ONR, with Secretary of State approval, to provide services related to its expertise but not part of its purposes. My noble friend Lord Jenkin eloquently articulated how important the provision is, because of the specialist knowledge that ONR possesses, if resource were available, to, for example, assist another country with assessing the safety of a new reactor design. Under the Bill, ONR could charge for such work, including at a commercial rate. The provision of such advice would have real benefits—not just financially, but, as my noble friend said, by helping to spread the UK’s high standards of practice internationally and giving ONR inspectors wider experience.
Let me be clear: the ONR’s first priority will be to meet its obligations as the UK’s nuclear regulator. Nothing will allow us to detract from this. My noble friend Lord Deben is right; we must allow the ONR to get on with its core activities. To ensure that there are no actual or perceived conflicts of interests, any commercial work which the ONR undertakes will be only with the consent of the Secretary of State. For those reasons, I hope that the noble Lord will withdraw his amendment.
Lord Jenkin of Roding
Before my noble friend sits down I hope I may be allowed to say how much we owe to the noble Lord, Lord Whitty, for enabling us to have debated a large number of matters during the course of the afternoon. As I said earlier, I had my doubts about whether we would take the time. We will stop just half an hour short and are most grateful to him.
Energy: Nuclear New Build Programme
Debate between Baroness Verma and Lord Jenkin of Roding(11 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text
Baroness Verma
My Lords, if we are talking about complacency, I would remind the noble Lord that his party was in Government for 13 years and failed to look at long-term investment in the energy sector. This Government have taken that on board. I remind the noble Lord that the decision that Centrica took was, as with the other two companies he mentioned, a commercial prioritisation and nothing to do with UK policy. If the noble Lord will allow me, I will quote Sam Laidlaw, chief executive of Centrica. He said the decision was about the prioritisation of its commercial priorities.
Lord Jenkin of Roding
My Lords, I share the concerns about Centrica and discussed them at some length yesterday with EDF. I have a much more serious concern to raise with my noble friend. I am very worried about how the Cumbria county councillors were persuaded to vote against moving to the next stage of a nuclear waste consultation. I will quote from an e-mail that was inadvertently sent to a Copeland councillor, and obviously sent by an anti-nuclear campaigner. It contains a chilling message. It says that they need a campaign to tell the councillors of,
“the threat that they might be personally liable for irrational or reckless decisions, particularly ones which do not put care of their constituency at their heart”.
It goes on that,
“the point is, to scare the crap out of them personally when they go to vote”.
Is that any way to treat a serious government consultation? Why is it no one’s business to try to rebut these mischievous statements that have circulated around the county over the past three months?
Baroness Verma
I thank my noble friend for drawing my attention to that. I invite him to forward me the e-mail that he quoted so that my officials might look at it in closer detail. I know that passions were raised on both sides of the argument in Cumbria, but that is right and proper in a democratic process. However, my noble friend is right that a lot of scaremongering and misleading information was distributed out there. Unfortunately, when we go down the road of ensuring that this is a community-led, voluntary process, one of the by-products is that there will be misleading information. I will look very carefully at that and if it is something that I need to raise further and looks as if it is intimidation, I will take it as a matter perhaps for the police to look at.
Nuclear Research and Development
Debate between Baroness Verma and Lord Jenkin of Roding
Baroness Verma
My Lords, the noble Viscount raises a number of key points. The UK is working very positively with its international partners and its partners in the EU. Alongside what I have already mentioned to the noble Viscount is our forthcoming strategy, which we are working on and will incorporate a number of streams, one of which will be a comprehensive landscape review of all our R&D activities. I am sure that when the noble Viscount sees that, he will be reassured that the UK is one of the leading hubs of nuclear research and development.
Lord Jenkin of Roding
Will my noble friend accept my congratulations to the Secretary of State on his appointment of Dr Paul Howarth to the national nuclear council, because that seems to me an admirable demonstration of the importance which the Government attach to nuclear research? Dr Howarth is, of course, the managing director of the National Nuclear Laboratory. I take this opportunity to wish him well.
Baroness Verma
I will, of course, pass on my noble friend’s congratulations to the Secretary of State and to all at the National Nuclear Laboratory.
Energy: Nuclear Power
Debate between Baroness Verma and Lord Jenkin of Roding(11 years, 12 months ago)
Lords ChamberRead Full debate Read Hansard Text
Baroness Verma
My Lords, the noble Lord of course knows that we are very keen to ensure that we have a diverse energy mix, and part of that will be new nuclear. He also knows that some processes take a little longer than others. However, new nuclear will help to diversify our electricity supply. Each nuclear power plant will be able to give reliable base-load electricity to around 6 million homes per year. We look forward to working alongside all our energy providers, including nuclear.
Lord Jenkin of Roding
My Lords, the question of new nuclear is slightly overshadowed because, in America, the extremely low price of unconventional gas is causing some anxiety to the nuclear industry. Will my noble friend accept that the Government’s policy of contracts for difference being introduced in the Energy Bill— the noble Lord, Lord Foulkes, has drawn my attention to the fact that the Bill is being published today; I have not seen it—is hugely important to the reassurance of the nuclear industry that it will be able to operate successfully and at a profit? Can my noble friend say when the actual strike prices will be announced, because that is the key?
Baroness Verma
My noble friend is of course right that there needs to be certainty. However, he will know that these things take a lot of negotiating and a lot of detail needs to be worked out. When I am able to offer my noble friend a definitive answer, I shall bring it to the House.
Electricity Generation
Debate between Baroness Verma and Lord Jenkin of Roding
Lord Jenkin of Roding
My Lords, is my noble friend completely satisfied that the Ofgem forecast is not being a bit cautious, particularly—to pick up the point made by the noble Lord, Lord Tombs—with regard to extending the lives of the AGR nuclear power stations? Is she aware that some of us heard a very compelling address to the Parliamentary and Scientific Committee by one of the research experts in this field saying that science now shows that extending those lives is distinctly feasible, perhaps up to the end of the decade and even beyond? If that happens, would that not significantly improve the figures that the noble Lord’s Question has quoted?
Baroness Verma
My Lords, I recognise and pay tribute to my noble friend’s expertise on this; having been in post for only eight weeks, I am sure that there is much that I can take away from him. However, I emphasise that the report has been prepared independently by Ofgem. It is important to acknowledge that the projections of future electricity capacity are dependent on a range of assumptions. I hear clearly what the noble Lord says about the nuclear power stations having extended life. All I can say to reassure him is that there are a lot of discussions going on and much of that will be relevant to what he has raised.
Nuclear Waste
Debate between Baroness Verma and Lord Jenkin of Roding
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, government policy for the long-term safe and secure management of higher-activity radioactive waste in the UK, excluding Scotland, is to place it deep underground in a geological disposal facility. Our approach to implementing geological disposal is community-led. The Government are committed to voluntarism, working in partnership with areas that have come forward to take part in the site selection process. To date, three local authorities in west Cumbria have expressed an interest in that process, but the invitation for other communities to come forward remains open.
Lord Jenkin of Roding
My Lords, I am grateful to my noble friend for that Answer. However, as she will be aware, the local authorities have sent a letter, which I have seen, asking for a pause in the process of agreeing how this radioactive waste agreement might be reached. The letter recognises that:
“The economic future of West Cumbria is inextricably linked to the future of the nuclear industry”.
Will she assure the House that the outstanding issues listed in the letter are currently the subject of serious and positive negotiations? Given that it has been the policy of successive Governments that they,
“need to be satisfied that effective arrangements exist or will exist to manage and dispose of the waste”,
and given that there remains a possibility, however remote, that the Cumbrian authorities may not be able to reach agreement with the Government, will she confirm that the Government have a plan B?
Baroness Verma
My Lords, I congratulate the three councils in Cumbria. They are robustly engaged with the Government in ensuring that it is a community-led approach. We are also working closely with key decision-makers such as business, the unions and local Members of Parliament. As my noble friend knows, it is a staged process, and this pause has come about because the councils require some clarifications to be addressed. I am pleased that they are taking this issue so seriously. The process will take many decades, so a rushed response would actually not be helpful to anyone.