Enterprise and Regulatory Reform Bill
Debate between Lord Jenkin of Roding and Lord Marland(11 years, 8 months ago)
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Lord Jenkin of Roding
Perhaps I can help with this question. Since the 1880s, it has been a matter of interpretation of statutes, and I was certainly taught at law school that the male embraces the female. It has therefore always been said that you used the term “he”, which meant, in the appropriate context, “he or she”. The result is that statutes and, presumably, amendments do not need to use the words “he or she” each time. My noble friend will find when he takes advice on this later that it is a well established principle of statutory interpretation, if I may repeat it, that the male embraces the female.
Lord Marland
I am grateful to my noble friend Lord Jenkin of Roding for explaining that. In fact, it coincides with a note that has just been passed to me affirming it. There are two issues, of course. First, our current Secretary of State is a he, and, secondly, we refer to each other as, “My Lords”. I hope that that means I do not have to write to the noble Lord, Lord Brooke, on the subject—although I am always delighted to do so.
Lord Jenkin of Roding
As we are in Committee, I hope that I can say a couple of words about this. The nuclear industry is, of course, building up this fund as part of the Government’s policy to make sure that the liability for decommissioning does not again fall on the taxpayer. It has recognised this, and it follows the same pattern as one has seen increasingly in the offshore oil and gas industry, where funds now have to be put aside so that when the oil rigs are decommissioned, again that does not fall on the taxpayer but is part of the cost that has to be built into the supply of the oil or gas and therefore met by the investor. I think that my noble friend Lord Teverson may be confusing two matters. I use the phrase again: this is a hypothecated fund. It is not like the pension fund. There never was a separate fund for that. It is simply that the pension contributions from, for instance, the teachers’ pension fund have been paid to the Government, and the obligations are met, of course, by the taxpayer out of the fund. There has never been any question of trying to balance the one against the other. This is quite different. This is a fund that is being set up and funded by the industry. It has to be built up while plants are operating—not just when they are commissioned—so that, at the end, when they come to be decommissioned, which may be 50 or 60 years ahead, the fund is there. They have invested in it so the cost will not fall on the taxpayers. It is a separate, hypothecated fund. It may make the green bank look bigger because it will have more money but it cannot do anything with it other than get a rate of interest. My noble friend shakes his head, but if they are going to start investing in green industrial ventures and so on, it seems to me that that would be a breach of trust to those who have built up the fund. It may be that they can hold it and, as it were, guarantee the payment, but the minute that they start investing it themselves, it seems to me that that is risking the whole purpose for which the fund has been set up.
A separate issue is whether there is an alternative method of investing in the Nuclear Liabilities Fund that might get a slightly more realistic rate of interest. That is a separate matter, but it seems to me that to make it part of the loan capital of the UK Green Investment Bank would be a breach of trust, as I suggested, against the firms that are building this up perfectly properly. They agree, they recognise it, and they know that they do not want to go back to the previous position, but they want the fund to be available to finance the decommissioning of the plants when the time comes.
Lord Marland
My Lords, perhaps I can deal with this quite swiftly. Both the ETS and the NLF, the Nuclear Liabilities Fund, reported to me in my previous department so I have a rough idea of what is going on. Let us deal with the EUAs and the ETSs first. I also sit on the government assets committee and we looked at selling some of our EUAs. We drew the conclusion that the price was not right, the market was not big enough and we would not be able to get a substantial figure into the market. However, as the noble Lord, Lord Teverson, rightly says, an opportunity may come along later.
Clause 4 permits financial assistance to be provided in any form,
“as the Secretary of State, with the consent of the Treasury, considers appropriate”.
If we were able to do it and if—that is a big “if”—the Treasury agrees, the Secretary of State could divert funds into it. Amendment 6 permits the Government to use a proportion of revenues from auctioning emission permits to fund the bank. There is already provision within that.
This is creative thinking and I am very grateful to my noble friend for that because he is a great creative thinker. I turn to the Nuclear Liabilities Fund. Clearly, as the noble Lord, Lord Jenkin, quite rightly said, two things are going on here. One is that this is a fund that is committed to nuclear liabilities; it is committed to the nuclear industry and, therefore, it has a range of opportunities in the nuclear industry in which it could invest. The noble Lord, Lord Wigley, referred to Wylfa and other investments in new nuclear. I had discussions with the chairman of the NLF about developing the fund into nuclear investments, including, for example, a MOX plant, which is something that we were committed to when I was in the department and, indeed, new nuclear. That is entirely for the NLF to decide for itself.
The problem I have with the NLF diverting funds here is that this is an investment bank and it is what it says. There is no such thing as a guaranteed investment. Some investments go up and some investments go down and if the NLF lost money, co-venturing with the Green Investment Bank on things that it did not understand, of course the liabilities would not be met. Despite the fact that we may consider it a very boring return on the investment at the moment, it is planned to match some of the liabilities. But I do not want the noble Lord, Lord Teverson, to go away thinking that actually the NLF is enhancing its investments, but think that it has enough on its plate with the nuclear industry.
Therefore, given the commitments that I have made on Clauses 4 and 6, I hope that, despite the fact that two very important points have been raised—and I am grateful to my noble friend Lord Jenkin of Roding, who has expertise in this field—the noble Lord will withdraw the amendment.
Energy: Gas
Debate between Lord Jenkin of Roding and Lord Marland
Lord Marland
I might be many things, but I do not think that the noble Lord will find me being complacent. I do not agree with him that gas is coming from unsafe places. Twenty per cent of our gas comes from Norway, with which I think we would all agree we have a safe and clear relationship; 5% to 10% comes from the Netherlands, with which we have another strong relationship; and, of course, 50% is from our own supply. We are not being complacent. We have given planning permission for another 20% of storage. We have made sure that our LNG stations are the best in the world. Ofgem is continually on the case in its work, and our gas generation strategy, which we hope to announce in the autumn, will be a fundamental game changer in that regard.
Lord Jenkin of Roding
Does my noble friend agree that there would be a greater chance of increasing the amount of gas storage in this country—we have far less than all the other countries in the European continent—if there were a statutory obligation on gas suppliers, similar to the one that affects suppliers of petroleum, to maintain a reserve in this country? This would enable those who are planning storage plant to raise the capital to pay for it.
Lord Marland
Storage is important, but one has to remember that we have 16 days of storage and planning permission for a 20% increase on that. Storage is therefore increasing, but the fundamental fact is that 150% of the nation’s supply of LNG is capable of being delivered and processed very quickly. So I do not think that storage is the be all and end all, particularly as we have three dedicated pipelines—one from the Netherlands, one from Norway and one from our own supply—which give us about 80% plus of our supply. I am therefore not as hung up on storage as the noble Lord might expect me to be.
Energy: Nuclear Power
Debate between Lord Jenkin of Roding and Lord Marland(12 years, 2 months ago)
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Lord Marland
Obviously, my Lords, I was running round in shorts 50 years ago—and in fact even now I barely understand what the noble Lord is saying. However, he is absolutely right that the fundamental point is that we need to get on with this. As I said, we will have planning permission in front of the Secretary of State by the end of this year, by December, on which he will opine until March 2013 at the latest.
Lord Jenkin of Roding
My Lords, although the energy Bill quite rightly spells out the details of the electricity market reform, which the industry regards as an extremely important element in helping it to reach its decision, it does not yet contain what is called the strike price. What will be the figure, and when will the Government be prepared to announce it? The strike price is what the industry is waiting for.
Lord Marland
As my noble friend rightly says, electricity market reform is fundamental to the setting out of future investment criteria and investment possibilities and predictability. However, we do not want to put the cart before the horse, and we want to make sure that everyone understands electricity market reform. At that point we will have a process whereby the Secretary of State will opine, having received—
Fuel Poverty
Debate between Lord Jenkin of Roding and Lord Marland(12 years, 6 months ago)
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Lord Marland
I will not get into the crossfire of the detail on that because I do not have the facts in front of me. However, we all know that energy bills have gone up. They will obviously affect pre-payment meters because you have to put more in to supply the energy bills. The big point that I am making here is that we are completely focused on reducing energy bills, which is why we have a raft of measures. The warm home discount is worth £1.1 billion. The core group rebate of £120 goes to 600,000 pensioners. There is the winter fuel allowance of £200. Cold weather payments worth £93 million have already been paid this winter, and £100 million has been paid under Warm Front. A huge number of initiatives are in place to protect the consumer and we are very committed to doing so.
Lord Jenkin of Roding
My Lords, in his first Answer my noble friend mentioned the Green Deal. Not least of the Green Deal’s attractions was that the up-front costs of insulating homes and other energy-saving measures are met by the private sector providers. Can the Minister reassure the House that, in working out the Green Deal, there will be enough providers to make enough money available to achieve the Government’s targets?
Lord Marland
The Green Deal is a very important private sector initiative, of which the Government have been the enabler. I am very grateful, incidentally, for the commitment from Peers on all sides of the House to ensuring that the Green Deal passed through legislation in such a well thought-out and well devised way. The Green Deal is an enabler and a marvellous opportunity for the private sector to provide energy to homes. It is for the Government to enable it further and pump-prime it to make sure that it happens.
Energy: Feed-in Tariffs
Debate between Lord Jenkin of Roding and Lord Marland
Lord Marland
Obviously, the whole point of the consultation is that we have representation from the noble Baroness and those communities that she represents. I would be delighted to meet them and pursue this issue in greater detail.
The scheme has been successful—too successful—and that is why we are taking these steps. As I referenced earlier, there is a continuation for aggregated schemes. From the communities’ point of view, surely the most important thing that we can do to support them is to have a retrofit programme. If we start from that end, solar PV makes sense. That is why the Green Deal is so important and is a banner product for this new Government.
Lord Jenkin of Roding
My Lords, I apologise that I was not here for the start of my noble friend’s Statement, but I had already read it. I welcome what he said about the importance of protecting consumers. I am not sure the noble Baroness, Lady Armstrong, recognised the fact that the cost of this is actually borne by the consumers of electricity; it is not paid for by the Government. The Government put an envelope around the maximum sum. In fact, the figures show that it will increase by nearly three-and-a-half times over three years. Nobody could accuse anybody of being stingy on that one. The fact is that any of these subsidies for special help to different forms of electricity generation goes straight through the companies on to electricity bills. I do not know whether the noble Baroness studies her own electricity bill; mine shows the amount that is being paid towards government subsidies—at the moment. What is it going to be in 2020? Ask Ofgem and it will tell you.
Why is it that not until paragraph 19 is there is a reference to the,
“placing a financial obligation onto energy companies, which is then passed onto the consumer through energy bills”?
If this consultation document had paid as much attention to that factor as my noble friend did in his Statement, I think it would be a great deal easier to understand.
Lord Marland
As always, I am very grateful to my noble friend Lord Jenkin of Roding for his intervention. It sets up the fundamental question: what is going to be the cost of FITs on the consumer’s energy bill by 2020? It is going to be £26. Bringing in these steps will reduce it to £3, which some people might not want to spend, but it is a considerable reduction. My noble friend is quite right about putting the consumer first, and I apologise that those in my department are masters of disguising that fundamental point.
Electricity Market Reform
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 1 month ago)
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Lord Marland
My noble friend Lord Teverson has always asked the apposite question. First, we want to get away from the language of a “dash for gas”. Gas will be fundamentally important. We are not dashing for it. We have to make sure that we separate the price of oil and gas. Gas is now a very competitive energy product, as we have noticed in the USA where shale gas has been discovered. We do not want to call it a dash for gas. It is long-term support for gas.
As to the market mechanism, Ofgem will be tasked with bringing liquidity into the market as the regulator. It has got to show some teeth in generating regulation. You get there by people generating their own electricity and feeding into the market on the one hand, and on the other requiring less from the electricity providers by having energy-saving products such as the Green Deal and smart meters—part of the programme that we have been pretty unified in wanting to adopt.
Lord Jenkin of Roding
My Lords, I will be quite short but can my noble friend answer one or two questions? First, we have waited a long time for this Statement. As I understand it, the reforms will require legislation. When are we likely to see the Bill? Secondly, he referred to the various forms of energy generation but I am a bit disappointed that we have in this White Paper a framework for renewables when we also need a framework for nuclear—my noble friend will realise that the Select Committee is currently looking at this. While I welcome the regular statement that is put out by Ministers on the importance of nuclear, there is huge doubt at the moment about what is going to happen after what they call the interim date of 2025. This is certainly affecting the idea of any investment for the future.
Finally, my noble friend referred to the need for new institutions to administer the FIT with contracts for difference, and also the new capacity payments. Can he give us a little more indication of what form those institutions might take? They are clearly going to perform a very important role in the new market structure that the White Paper foreshadows.
Lord Marland
As ever, the noble Lord, Lord Jenkin, knows the subject. I am slightly disappointed that he does not believe that there is a nuclear framework. We announced that there are to be six new nuclear power stations and reaffirmed that announcement two weeks ago and the sites where they will be located. Realistically, there are a number of issues in terms of the balance sheets of some of the companies wanting to invest—as we have seen from the fall-out in Germany. Having spoken with EDF, Iberdrola and others this week, I know that they are very committed to the cause of the nuclear framework.
As to when the legislation will happen, we are obviously hoping that it will start at the end of this year. There are some timing issues, even with getting the first Energy Bill back to this House—as we all know. The legislation issue will be difficult because there is a certain logjam in the other place.
On who will operate and regulate the supply, this will largely be Ofgem, which will have greater teeth. As we are running a little bit out of time, I am happy to discuss at a later time with the noble Lord the various component parts of that rather than going into it now—if he is happy for me to do so.
Weightman Report
Debate between Lord Jenkin of Roding and Lord Marland
Lord Marland
The Weightman report does not go into great detail about reprocessing. As the noble Lord knows, that is my responsibility within the department. I am comfortable with the briefing that I have and the progress that we are making. I am grateful to him for raising the question; as he knows, I try to keep him informed as a man of Cumbria who has represented it well for many years. I am confident that there is a strong commitment to that industry in that part of the world.
Lord Jenkin of Roding
My Lords, I join my noble friend in thanking Dr Weightman for what has been, in an astonishingly short time, a very detailed interim report. We look forward to his final report, which will go wider than the electricity-generating industry—that is what he is offering. As well as thanking him, though, I express my admiration for what the Chief Scientific Adviser, Sir John Beddington, was able to do while he was in Tokyo. There is no doubt about it; he was extremely valuable in understanding what was going on in Japan and giving advice to the Japanese from his great experience, as well as keeping this country thoroughly informed about what was going on. It is right to mention that.
I have one question, which I hope that my noble friend will be able to answer. It is mentioned before conclusion 3 that the ONR is in an interim state at the moment, half way between its former nuclear installations inspectorate and the final solution where it will be, as it is said, a “standalone statutory corporation” outside the Health and Safety Executive. We have been waiting a long time for this to happen, and I know that Dr Weightman and his colleagues attach enormous importance to establishing and reinforcing their own independence from Government. When will we have the statutory instrument that will create that final stage?
Lord Marland
I add my comments to those of the noble Lord, Lord Jenkin of Roding, about the role of the Chief Scientific Adviser. Sir John Beddington has been magnificent. This also gives me a final opportunity to thank Dr Weightman because between them the two have been efficient, sound and reliable in the way in which they have produced this excellent document.
The independent regulatory body, the ONR, was an idea conceived by the previous Government, on which I congratulate them. It went into abeyance as we went into the election period. When we got into power, one of the first things we did was to put the ONR into operation so that it is now an agency that operates unilaterally. By the end of this year, or certainly by the beginning of next year, we hope to have put that on to the statute book to give it total independence, which will be ratified around 2013. As we get closer to the date, I will be happy to give that information to the noble Lord, who I know follows this matter closely.
Warm Home Discount Regulations 2011
Debate between Lord Jenkin of Roding and Lord Marland
Lord Jenkin of Roding
My Lords, like my noble friend I, too, welcome these regulations. They bring a little more certainty to what has hitherto been a rather uncertain variety of schemes.
My main concern has always been how the suppliers are intended to identify the householders that they are supposed to help. My noble friend will remember that we had some discussion about that on the question of the Green Deal. It is on these energy discounts and what have previously been called rebates on bills that the problem has been at its most acute. I do not need to go over the detail of this, but when we first debated the CERT scheme—it must be nearly four years ago—two things were evident. One was the considerable hostility of the industry—the suppliers—to becoming involved in this sort of activity. I think attitudes have dramatically changed, and I find in talking to industry representatives a clear recognition that helping those who are most likely to suffer fuel poverty is indeed very much part of their social obligation. I welcome this change of heart; a variety of factors have contributed to it and I do not necessarily need to go into them.
The second problem, as I said, has always been that of identifying the households. We pressed former Ministers very hard on this and eventually secured a clause in the Pension Bill which allowed Ministers in the Department of Work and Pensions to supply the names of pension credit pensioners, as households likely to be most in need. Given the problem that had been identified—I will forbear from giving a quotation in Latin, because that now is rather frowned upon in this House.
Lord Jenkin of Roding
Right: Parturient montes, nascetur ridiculus mus. The mountains heaved in childbirth and what came out was a ridiculous mouse. We had asked for far more clarity on how these fuel poverty households were to be identified and my discussions with the industry then revealed that they were wasting a very great deal of time and money on going from house to house trying to find out who they were. Of course, they got much better at it; they began to recognise—as, indeed, most people’s common sense would say—that there are areas in which you will find a much higher concentration of fuel poverty houses, but they also found that quite a number were not eligible for help because they had already had Warm Front help and this added to the problem. This is nothing new; it has been going on for some time.
We have here, as my noble friend has described, two main groups; the core group and the broader group. I very much welcome, because it meets the demands that have been made over the years, Part 1 of Schedule 2 of the order, headed:
“Eligibility criteria: descriptions of persons satisfying Condition 1”
—that is, the core group. Instead of having what had hitherto been either a tiny pensioner group or a fairly indeterminate criterion, we have, in these four sub-paragraphs, descriptions of the kinds of households which should form part of the core group. I very much welcome that; some progress has been made. However, as I think my noble friend Lady Maddock said—we are promised further regulation on data sharing—it is all a question of data sharing and what is legitimate under the general law.
Paragraph 4.3 of the Explanatory Memorandum says:
“It is also intended to make further Regulations under section 142 of the Pensions Act 2008 to authorise, and prescribe safeguards in connection with, the sharing of data between electricity suppliers and the Secretary of State. The purpose of the data sharing will be to facilitate the exercise of the Secretary of State’s powers under Part 3 of this instrument”—
these orders, these regulations—
“by enabling the Secretary of State to identify which of a supplier’s customers are recipients of state pension credit”.
Is there any advance in this? Are we in any way going beyond the state pension credit households who are going to be identified so that suppliers can know precisely who they have to help? I had thought, to begin with, that this was going to be an extension of the defined criteria, but I think, if I can put it this way, that it is still the same ridiculous mouse, in which case, what is the purpose of the further regulations? What are we to expect from those?
I will not quote them but I have figures here of what the industry has been doing under the voluntary scheme introduced by the last Government, which clearly has been very helpful. However, I welcome this tighter scheme which is now coming into operation as a result of these regulations. My noble friend gave the figure of £1.1 million. I have the chart here of how that is going to be made up and how the amounts on the core group and the broader group are going to increase over the next four years. There are much smaller sums of money in the broader group, which is interesting. The legacy spending, as he said, is going down so that the figures broadly balance. Then there is evidence of the figures for the legacy spending cap and the industry initiatives cap, with the total for each year rising from £250 million in 2011-12 to £310 million in 2014-15. Those figures add up to the figure we gave of £1.1 million.
Lord Marland
My Lords, I am grateful as always to the input from my noble friend and those on the opposition Benches. Again, I would like to thank opposition Members for giving me some indication of the angle that they were coming from in terms of questions. It is extremely helpful. These are detailed questions which I will seek to address now, but clearly, for some points, it may be useful if we put something in writing at a later stage for clarification; as always, I am happy to make officials available for further clarification.
I shall deal first with my noble friend Lady Maddock, who has unrivalled knowledge in this field through her work in the charities sector. She quite rightly asked about the overlap between the groups. I can assure her that we put in place arrangements to allow suppliers to continue to provide benefits to customers, receiving help under the current voluntary agreement through the legacy spending section. The amount of funding available, which I think is the figure that she would like to know in relation to the first scheme, is about £140 million. This would allow that continuation and assistance.
What percentage of those pensioners who receive the existing winter fuel allowance will be helped by the scheme? The noble Lord, Lord Jenkin of Roding, was alluding to this question as well. There are 12 million such pensioners, and in the first year we anticipate that 800,000 people would benefit, which is roughly 6.5 per cent—I say despite my failure at the old-fashioned maths O-level—and 1.3 million towards the end of the scheme, which is just over 10 per cent. I hope that is a satisfactory figure.
My education continues with the noble Lord, Lord Jenkin of Roding, talking to us in Latin. I am very grateful in this particular instance that he did do a translation—I did Latin O-level, but it needs some brushing up. I notice the noble Baroness opposite did not need to have it translated for her.
Lord Jenkin of Roding
If it will help my noble friend at all, I can tell him that it was a line from the poet Lucretius.
Lord Marland
You see, you learn so much in these debates, don’t you? I am so glad that the noble Baroness opposite showed me that she knew exactly what we were talking about, whereas on these Benches we have to be educated.
That takes me away from the thrust of his real question, which was how suppliers identify households in the criteria. As he rightly says, if you read the document, page 18, Part 1, Schedule 2 outlines how we have got to the criteria— I sound like the noble Lord, Lord Jenkin, now, because he normally quotes references from here. Are we going beyond the state pension households? Obviously, we would like to. It is very important to await the findings of Professor Hills to find out what the fuel poverty criteria is going to be, because that is where our focus and attack has got to be. I am grateful for the support from the Benches opposite, and I am delighted that we will listen to what Lord Hills—not Lord Hills, not yet—Professor Hills has to say before we really attack this subject.
Again, I am grateful to the noble Lord, Lord Jenkin, for pointing out the table— although I have lost it now among all this paper—which clearly shows the application of funds. I will be very happy to provide that to anybody who has not seen it because it shows quite clearly the distribution of funds to these groups.
The noble Baroness, Lady Smith of Basildon, asked four or five questions, but fundamentally whether this will this pick up the fuel poor. I refer to the remarks I have just made: clearly, the whole point is to take people out of fuel poverty, to stop this figure of 4 million, which is running slightly out of control at the moment, and grind it to a halt.
Her first question was about the identification of the core group in terms of the collection and protection of data. We have a data-matching organisation on hand to carry out a comparison of names and addresses, energy suppliers and customers. Names and addresses would be held by the DWP on pension credit recipients. Where the data matches, each energy supplier would be told which of their customers have matched and are therefore eligible for the rebate. The purposes for which this shared data may be used are set out in the scheme’s regulations. I hope that helps answer that question.
The core group is of course focused on pension recipients. These are some of the poorest pensioners. We know that over half the fuel poor are pensioners and over 89 per cent of the fuel poor are in the lowest three income deciles, which is very useful information to bear in mind.
The noble Baroness then asked for information about the reconciliation mechanism. The mechanism will be necessary only to share the costs of providing help to the core group. This is because each supplier will have to provide help to all its eligible customers identified by the Secretary of State thorough the data-match and suite processes, and the spread of customers is unlikely to be equal.
We then moved on to identification of the border group and why the terminally ill were excluded. The regulations are clear that the suppliers should target those in fuel poverty, as we have just said. That should include low-income families but we should also be very mindful of the terminally ill, the disabled or the long-term sick because they are the ones who find it most difficult to cope with this problem, and I can give the noble Baroness an assurance that that is very much in the forefront of our mind.
There was a very good question on voluntary agreements. We put voluntary agreements in place to allow suppliers to continue providing benefits to customers receiving help under the voluntary agreement through the legacy spending section of the scheme. However, we believe that the core and broader groups will take more people out of fuel poverty as well as providing clearer and more predictable benefits. We therefore propose that the legacy spending should be transitional and that suppliers should have to manage their spend over the scheme period.
The noble Baroness’s final point was about two people living together who were not married or in civil partnership being eligible. The rebate will be paid to either member of the couple where one of them satisfies the eligibility criteria and is also the electricity bill payer. The regulations set out the meaning of the word “couple”, which is well worth knowing. The definition is that generally used for benefit purposes: two people are treated as a couple if they are married, not married but living together as husband and wife, in a civil partnership or not in a civil partnership but living together as if they were. And if you can get to the bottom of that, you will be much the wiser.
The question of pre-payment meters is a valuable one. Over 80 per cent of the fuel-poor use the pre-payment method, so it is very important that we work with that. The pricing mechanism is a matter for Ofgem, which has recently produced a review that is available. I am happy for our department to put one in the post to the noble Baroness for some light bedside reading when she is enjoying a weekend off.
Sorry, did I say that the fuel-poor used pre-pay meters? Over 80 per cent of the fuel-poor do not use pre-payment meters.
I am grateful to noble Lords for their input, as always, and it is fundamental, as we have said on many occasions, as those who have listened to our energy debates in the past will know, that we should focus on getting people out of fuel poverty. This Government are determined to concentrate on that issue, as I know were the previous Government. That is where the warm homes discount can make a difference. I commend the order to the House.
Energy: Shale Gas
Debate between Lord Jenkin of Roding and Lord Marland
Lord Marland
My Lords, it is abundant and cheap in America, where a great amount of it has been found—three times the supply, in fact. However, we have different problems here in the UK. We have a high population density and are unsure of the reserves. There are all the planning issues that go with high population density. Therefore, it will not necessarily at this point mean a huge surge in the gas supply in this country. However, the point that my noble friend makes about taxation and the carbon floor price will be taken into account with this technology.
Lord Jenkin of Roding
My Lords, the noble Lord, Lord Teverson, rightly mentioned water pollution. Is one of the problems of exploiting shale gas in a country such as ours not that it requires huge quantities of water? When we are likely to face water shortages in the near future, would that not seem to be rather an unwise thing to do? Is it not clear that the biggest consequence of shale gas will be the exploitation of the enormous American supplies, which are already having an impact on the global gas price?
Lord Marland
My noble friend makes a point about the competition that American shale gas has brought to the gas supply. That is very valuable to us now that we are net importers of gas. We hope that it will compress the price of gas. As to water, it has been pointed out that we are an island and there is a lot of water around us. I do not think we will end up with a huge water shortage, provided that we use the right water.
Energy Bill [HL]
Debate between Lord Jenkin of Roding and Lord Marland
Lord Marland
My Lords, as the noble Lord, Lord Davies of Oldham, has telegraphed, this group of amendments respond to the excellent comments made by my noble friend Lady Noakes—such is the harmony that flows between the parties at the moment I was going to say his noble friend Lady Noakes—and my noble friend Lord Jenkin of Roding. The Delegated Powers Committee also prompted a number of these amendments. I hope they are self-explanatory and respond wholeheartedly to suggestions by my noble friend Lord Jenkin of Roding, to whom we are, as always, extremely grateful. I hope that the amendments satisfy his requirements and those of the Delegated Powers Committee. I beg to move.
Lord Jenkin of Roding
My Lords, I am indeed entirely satisfied with this group of amendments. This gives me an opportunity to say that the Government tabled no fewer than 145 amendments to the Bill. I assure the noble Lord that I did not have to count them. He was kind enough to send them to those of us who are active on the Bill numbered one to 145. It was a little difficult sometimes to match them up with the numbers of the amendments that finally appeared officially on the list.
Lord Jenkin of Roding
Of course. I am not blaming my noble friend for that in the least. On the contrary, I found it all extremely helpful, accompanied as they were with helpful notes to explain the amendments. He has met our case splendidly with this group.
Lord Marland
I am grateful to the noble Lord, Lord Davies, for helpfully answering this question for me because it is absolutely fundamental that if we withdraw the liability from one party, we have to establish where it is going to fall. No one knows more about the industry than my noble friend Lord Jenkin of Roding. He is very close to it indeed and, as he said, this is a complex accounting issue on companies’ balance sheets. These implications need to be looked at carefully and that needs to be done in consultation with businesses. I refer to what the noble Lord, Lord Davies, said earlier: if we withdraw from one, we have to work out who is going to pick up the bill at the end.
I make a strong commitment to my noble friend Lord Jenkin of Roding—he knows that when I make these commitments, I mean them—that we will be liaising with the energy suppliers and the finance providers over the next few months as we put together the important financing of the Green Deal which, as we all know, we have not as yet structured. It will, however, be an important structure and through that we will develop a policy and provide absolute clarity on this issue for, we hope, all parties. It is fundamental that all parties go into this Green Deal approach unified and clear of their position and, indeed, that the customer is clear of his recourse in that position. That is a commitment that the Government will make to this process and I hope that the noble Lord will be satisfied to withdraw his amendment.
Lord Jenkin of Roding
My Lords, in reply to the noble Lord, Lord Davies of Oldham, I say that if the supply companies are not going to be made liable then it will of course be the providers. They put up the money and if there is a default then, like any lender, they have to bear its cost. The risk of default could mean a marginal increase in the rate of interest that they would have to charge in order to cover that risk. They do not face the same problem as the supply companies, which have the problem of having the whole thing landed on their balance sheets. As I have said, that could amount to billions of pounds.
I am extremely grateful to my noble friend for his promise to consider this. He has of course been as good as his word on so many of the other undertakings that he has given. While he will be discussing this with the industry and with the providers, I simply find it difficult to believe that it could be right in the present circumstances to leave the whole of the debt outstanding, in the case of a default, on the balance sheet of the supply companies. I want to make my own views on that clear. Having said that, my noble friend has made a fair offer and I beg leave to withdraw the amendment.
Energy Bill [HL]
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Marland
Giving it a ROC is an incentive to use it. This means that it is in a totally different category from nuclear and therefore fits into the same category as onshore and offshore wind, which also benefit from the same revenue contributions and financial support. I hope that clarifies the point.
Lord Jenkin of Roding
Following on from that question, will the Minister confirm that, if there turns out to be a need for a subsidy for geothermal energy in the way discussed, and the subsidy is in the same form as that for onshore and offshore wind, the cost would fall, as with those two generating systems, on the consumer?
Energy Bill [HL]
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Marland
The noble Lord makes a point. Of course Ofgem will be brought up to speed with what we are doing. I do not think that its review will have drawn the conclusions that we want by the time we have finished the Bill. There is some presupposing that people are sitting in knowledge. I have heard many different suggestions in this Room already today about how much we have or do not have in storage, and about what we should or should not have. It is up to the Government to look carefully at the facts and accelerate procedures where we think that should be done, as we have already done by 25 per cent—and we have been in government for only nine months; maybe a bit longer now. We have a level of comfort that is correct—not just in our own judgment; a whole range of sources tell us that we have it correct. The previous Government felt that it was the correct figure. If the information that results from the review shows us that we need to enact, we will. Ofgem itself has existing powers to modify licences and introduce new licence requirements, and may well do it itself. Of course this is very much a subject for debate, evaluation and continuing process, and I hope that satisfies the noble Lord.
Lord Jenkin of Roding
My Lords, few movers of an amendment such as this could have had such powerful supporters as the noble Lords, Lord O’Neill, Lord Hannay and Lord Oxburgh. I feel greatly reinforced by the strength of the case which they have made. It would not be wholly unfair if I said that I was a little disappointed by the Minister’s reply.
The noble Lord, Lord Hannay, asked whether it would be open to Ofgem in its consultation to come forward with a proposal which said, “Yes, all right, we will strengthen the balancing mechanism but we also think that there is a case for increasing the amount of storage and that this will require some further measures”. That was a critical question, and I am not sure that I understood the answer.
We are talking about future demand and supply over a number of years. I have been provided with a chart, compiled by a consultant, which draws on all the various forecasts of demand for gas. If one looks ahead up to 2025, which is after all only 15 years ahead, one sees that the forecasts vary from a reduction in demand to three-quarters of the present level to an increase of a quarter. Those are huge variations, reflecting the uncertainty with which we are confronted when dealing with supply. We have tended to talk about supply, but the balancing mechanism is essentially a balance between supply and demand. If there is such a wide variation in the estimates made by experts—people who know what they are talking about—we should take that into consideration.
Yes, it is true that we have an indigenous supply, which is why our figure would, for the moment, be lower than that in our neighbouring countries—as I indicated in my opening speech. There may also be another Buzzard-type discovery in the North Sea. A recent discovery of gas quite close offshore certainly helped supply here. However, we must be cautious about what we say after the past two winters. Everybody has recognised that the electricity supply has been quite seriously affected by the recession and that the point at which we reach concern has therefore moved three or four years further forward. Why is that not the same for gas? We got through these last winters because there was a considerable measure of operating below capacity, which I hope will not continue. So here is another element of uncertainty.
We need to give more consideration to these matters. I shall certainly discuss what the Minister has said with those who have advised me. It may be that the noble Lord, Lord Hannay, is right and that we will get the Ofgem report before we reach the Report stage of this Bill—it looks a little less likely than it did before the weekend, but it is a possibility. We have another energy Bill coming up, which will affect among other things energy prices and the powers of Ofgem, so we may have another opportunity. I shall reflect; I hope that the Minister will do so, too. In the mean time, I beg leave to withdraw the amendment.
Energy Bill [HL]
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 6 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Marland
The answer is quite simple. We have to put in a prescribed date or it is unfair on those who have to fulfil their obligations by that time. If you do not prescribe the time when we are going to review it, they have no idea of the timetable on which they have to act, so it is very clear. I have made quite a concession already that we are going to review the first date, which will be 2013, and that thereafter there will be dates to monitor how this Bill goes forward. I disagree with the noble Lord on this rare occasion. We have to send clear signals to the market as to how this is going to operate.
Lord Jenkin of Roding
Perhaps I may add a word or two to the debate because I put my name on the amendment. We spent a good part of this afternoon’s proceedings all agreeing that the Government face a major challenge in seeking to extend the Green Deal or apply the Green Deal to the private rented sector; indeed many noble Lords from all parts of the Grand Committee were stressing the problems that are being faced on this. I agree with that.
Although I have a lot of sympathy for those who say we have waited a long time, we must get on with this. If we try to hurry it forward and bring forward the date of the review and curtail the length of time that the review may take, it will go off at half cock. When dealing with the complexities and the challenge, which I described earlier as enormous when citing the federation, we have to be prepared to make sure that the authorities and all the people who take part in this—the property owners, landlords and tenants so far as is possible—are sufficiently aware of what is expected before one tries to rush forward.
My noble friend Lord Teverson says that by 2013 we will know and have enough experience, but with the greatest respect I do not believe that for a moment. This is going to start pretty slow and the immediate reaction will be people coming along and saying “It’s not happening”, and that we have to have compulsion and the full panoply of regulations. That would be very unwise because it might get the process off in the wrong way.
The Minister has been absolutely right. The Government do not want to go down the road of compulsion through regulation, yet if one rushes the review and starts to make decisions on what is bound to be pretty imperfect and incomplete information, my guess is that is that we will be in greater difficulty than we otherwise would have been. I would therefore urge more caution on this.
The date that my noble friend and I have put on this amendment and the other amendments that go with it are perfectly realistic and I would not agree with the noble Lord, Lord Davies of Oldham, that we could bring the thing forward. That would run straight into the dangers which I have been trying, in my own imperfect way, to point out.
Perhaps I can say to my noble friends on the Front Bench that, if the Government are being criticised for anything, it is that on a number of issues they are moving too fast and trying to do too much at the same time. We are dealing here with a problem whose origins go back many decades. Indeed, in some cases it will be centuries. To try to rush forward and deal with it all in a relatively short time is a potential recipe for disaster. I hope that the Government will get the message that this needs a measured approach with enough time being given for people to consider and make sure that they understand the information that is to come out of the review before rushing to make regulations. That comes back to the very first point I made earlier this afternoon. If you go too fast, it will have the effect of drying up the rented sector. People will throw their hands in the air and say, “Blow that. I am not going to let any more”. That would be a very great pity.
Energy Bill [HL]
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Jenkin of Roding
Can my noble friend give some indication of what level of fee—I made the point about early repayment, perhaps a successor owner wishing to pay off the whole bill and not have it hang over them—he thinks is likely to be charged under the arrangements that my noble friend has outlined? There really is an argument for keeping that as low as possible.
Lord Marland
I totally agree with my noble friend Lord Jenkin. There is always an argument for keeping everything as low as possible. However, we are not at the stage of the Bill where we should be able to predict or prescribe how additional fees are charged. I think I have spoken to that; I hope that my noble friend feels that I have. We have a lot of discussion, dialogue and consultation to have with the financial institutions who may well be providing that finance.
Lord Jenkin of Roding
I was inspired to table my amendment by the proposal of the Delegated Powers Committee. In paragraph 11 of its report, it drew attention to the absence of a limit in the Bill and of the penalty that could be imposed. It took the view that as the affirmative procedure would be required, it would not regard the derogation of the power as inappropriate. However, it suggested that there should be a maximum penalty.
Looking at this provision, and applying my little skill and dubious judgment, I suggested a figure of £500. My amendment was tabled before that of the Official Opposition, and I am intrigued to see that they tabled the same figure for corporate bodies but a much lower figure for individuals. I would like to know what the Minister has in mind as an appropriate level of penalty. Mine is an entirely probing amendment.
Lord Marland
I thank noble Lords for their suggested amendments to Clause 14 to limit the level of financial penalty on individuals and companies for failure to comply with the disclosure and acknowledgement provisions. This clause provides the powers of the Secretary of State to make regulations to ensure that sellers and licensors comply with their disclosure and acknowledgement obligations. The clause allows for the following specific provisions to be made: sanctions for non-compliance, including civil penalties; requiring the Green Deal provider to cancel the liability of a bill payer to pay Green Deal plan instalments; requiring the Green Deal provider to refund any payments already made; and requiring those at fault to pay compensation to the Green Deal providers.
I understand noble Lords’ desire to protect individuals and businesses from excessive penalties. However, the disclosure and acknowledgment requirements are vital to the effective operation of the Green Deal and indeed to protect the customer, so we need robust and transparent sanctions to ensure that they are all complied with. We will work with relevant industry stakeholders to develop options as to how these provisions will apply in practice to minimise instances of non-compliance. I wish to emphasise that we will consult before setting out these arrangements in regulations.
Our aim will be to use existing and well established systems of sanctions and redress where possible. Further consideration is necessary to determine what level of civil penalty would provide sufficient deterrence to ensure compliance, but I trust noble Lords understand that it would be premature to make a decision on an upper limit at this stage. In conclusion, I assure noble Lords that we will seek to ensure that penalties are proportionate. I hope that this assurance will enable the noble Lord to withdraw the amendment.
Lord Jenkin of Roding
I raise a point on this, because it is relevant to a question that I asked on Second Reading. If there is a default on the repayment of a Green Deal loan by a bill payer, which of the parties bears the cost of that default? Is it the energy supplier, whose job it is to collect the repayment as an addition to the energy bill, or is it the provider who put up the money in the first place? I am not sure that I have yet had an answer to that question. I know that it is one that worries suppliers. Many of them are energy companies, which are likely to face considerable strain on their balance sheets due to the huge investment which they will be making in generation and transmission equipment over the next few years. They are anxious that if they find themselves liable to bear the costs of default under the Green Deal scheme, that may affect their balance sheets and the perception of the financial markets.
I do not know whether this is an appropriate point to raise that question, but we are talking about defaults, and that is a question which really needs an answer. My noble friend may well not yet be in a position to answer. I think that I am right in saying that it was not answered on Second Reading, but it is a question which is causing concern and to which, at some stage, there will have to be a full answer.
Lord Marland
We will develop this theme as the Bill goes through. Of course, in the first instance, it is the consumer to whom we would go in the event of default. Then, my noble friend rightly asks, will it be the Green Deal provider or the electricity provider? We are consulting on that issue at the moment. It is a very important thing to consult on, and when the consultation is over, we will bring it in to the Green Deal.
The Deputy Chairman of Committees
Was the noble Lord speaking to the amendment or to the clause?
Energy Bill [HL]
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 7 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Jenkin of Roding
My Lords, it is perfectly clear that there is a great deal of detail to be worked out before the Bill becomes operative. Can my noble friend give the Committee an assurance that there will be the fullest consultation with outside interests? And, as has been sought by the Opposition, can he give some indication as to what the various statutory instruments are going to contain? There is an enormous amount of support behind the concept of this Bill. The representation I have had this morning makes the point that,
“there is clearly great deal of detail to be decided upon and it is important that this is done in such a way as to ensure the policy is fit for purpose”.
That is a sentiment that I wholly endorse. I, too, warmly support this Bill, not least because, as I said on Second Reading, it tackles the whole objective by approaching the consumer—the householder—in a totally different way from what happened in the past; they are not being asked to save the planet, they are being asked to save on their energy bills and perhaps have a more comfortable house. That will appeal to a large number of people. Of course, the details will have to be very carefully worked out. I hope that my noble friend can give me some assurance about consultation with the many interests that will have to help operate the whole scheme.
Lord Marland
My Lords, this part of the Bill introduces the Green Deal. The Green Deal is at the heart of this Energy Bill, representing a key part of the energy policy and our commitment to improving energy efficiency. In response to my noble and learned friend Lord Jenkin of Roding—
Lord Marland
My noble friend is learned, but not in the way that I meant. He does not want to be called learned today.
I cannot imagine a department that consults more than ours. We are locked in consultation on virtually every move we make and will continue to do so. We have had a lot of contributions from outside which we have taken on board in getting to this point.
The Green Deal is designed to address the longstanding problem of how to improve energy efficiency of existing building stock. While on paper improving efficiency of buildings makes sense to save money, protect our climate and improve the comfort of our homes, in practice too little has been done too slowly. There are some good reasons for this: people find it hard, or are reluctant, to take out large loans for property they might leave soon; they often do not trust salesmen and installers; and they are busy and simply do not know what to do.
Our solution, the Green Deal, is threefold. First, the Green Deal plan is a contract under which private companies provide finance up front for energy efficiency improvements and individuals then repay through their energy bills. Liability to repay attaches to the energy bill payer for the time being, so that only the person benefiting makes the repayments. The contract transfers to subsequent bill payers.
Secondly, there is the golden rule: the protecting principles which require that repayment costs should not exceed expected energy bill savings. Thirdly, there is the accreditation and redress system, which is the guarantee of quality which consumers need. It is a simple concept, but to make it both simple and secure for consumers, we need to put a robust framework in place. To ensure attractive external simplicity for the customer, we need to ensure that the internal mechanism comprehensively covers all those involved in the scheme—the assessors, installers, Green Deal providers and energy suppliers. This is a market mechanism funded by private capital.
In response to the noble Baroness, Lady Smith of Basildon, our responsibility is to create a robust framework backed up by redress and quality control. The Bill focuses on this enabling framework; we will certainly be consulting on the detail for secondary legislation, and I look forward to the input.
I will now speak to the detail of Clause 1. It provides for the Green Deal plans an arrangement made by an owner or occupier whereby a Green Deal provider makes energy efficiency improvements to that property. As the noble Lord, Lord O’Neill, said, it is important that we define what is an eligible property, but it is also important that we do not define it in a way that restricts properties. Therefore, the broad definition is as far and wide upon domestic and commercial properties as is possible. Of course there will be exceptions which we are starting to develop, such as something that may have been purchased under a compulsory purchase order. As the noble Lord rightly says, we need to define this over the next few weeks.
The clause defines the conditions that must be met in order for an arrangement to make energy efficiency improvements qualify as a Green Deal plan. By setting out these conditions as requirements of the plan, the clause defines the basis of the Green Deal. Subsection (3) sets out the two conditions that must be met. The first is that,
“the energy efficiency improvements are to be paid for wholly or partly in instalments”.
The second condition is that the requirements of subsection (4) are satisfied. These are that there must be “a relevant energy supplier” supplying or about to supply energy to the property. The energy efficiency improvements to be made must fall,
“within a description specified in an order made by the Secretary of State”.
By setting out qualifying improvements, we can ensure that the customer benefits only from recognised and proven technologies.
Subsection (4) also states that the important conditions mentioned in subsections (4) and (5) must be met. These relate to the assessment of the property and the financial terms on which the Green Deal is offered, and a number of other terms that must be included or must not be included in the plan. This is to ensure that only measures that are appropriate for a property are recommended.
Lord Jenkin of Roding
I am most grateful to the noble Baroness for that explanation: I had entirely misunderstood the amendment’s intention. It refers to,
“ensuring that such payment is proportionate to the size and nature of the green deal assessor and provider”.
I thought that we were talking about individuals, but the noble Baroness has made it clear she is talking about companies, not the size of the man who is doing the assessing. I realised that there must have been a serious purpose behind the amendment, and she has now explained it.
I think that both these amendments are exceedingly difficult. One can always have sympathy with charities and other people who work for good, or not for profit—or whatever it might be—but at the same time, for the most part, professional services must be paid for. Unless somebody is doing work pro bono, which lawyers and others do from time to time, professional services must be paid for on a proper professional basis. That is what we are talking about. The idea that one should have reduced costs depending on the nature of the client is a difficult concept to import.
We are concerned to ensure that this will be as simple a process as possible. I said at Second Reading that I thought this had the ability to become a much more workable and simpler scheme for all parties to understand than has been the case under the CERT scheme, but I think this amendment would add a complication which I would not support. I am sorry to disappoint the noble Baroness, but I think professional services must be paid for properly.
Lord Marland
I thank the noble Baroness for raising this amendment. It is critical, particularly at this time, that we take into account the charitable sector, of which she has great knowledge. Indeed, so do I to a certain extent, from involvement with a number of charities. Obviously, I can only accept amendments such as these once they have been agreed with counsel and other Ministers, but we will consider how best to take on board this policy aim, which I think all of us would endorse and support in this sector.
Electricity Market Reform
Debate between Lord Jenkin of Roding and Lord Marland(13 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Jenkin of Roding
My Lords, while warmly welcoming my noble friend’s Statement, it gives rise to several questions. I have one in particular. Is it part of the purpose of the proposals to provide a longer-term level playing field across the different low-carbon generating technologies? That seemed to be inherent in the Statement last November of his right honourable friend Mr Huhne. However, my noble friend’s department has recognised that the lifetime carbon footprint of nuclear power is roughly equal to that of wind power. For how long will it be justifiable for the consumer to have to pay a substantial subsidy to generate more wind power when you could get a more reliable source of energy at a lower cost from a larger nuclear programme? I would be most grateful for the answer to that question.
Lord Marland
There is no greater expert than the noble Lord on these matters. I can assure him that this electricity market reform is to establish a level playing field for renewables and to get a clearer line of benefits and support for it. As to his point about nuclear power, we have cleared the decks for the start of new nuclear. His experience would concur that, unfortunately, the period for establishing a new nuclear power station is a minimum of eight years. Then there are all the other regulatory issues that we must go through in getting to there alone. My noble friend will know—because he is so knowledgeable on all these matters—that the 2050 pathway, which will incur a doubling of electricity demand, means that we will have to obtain electricity from virtually every source we can get our hands on.
Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2010
Debate between Lord Jenkin of Roding and Lord Marland
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, the carbon emissions reduction target, known as CERT, requires the larger energy supply companies to meet household carbon emissions reduction targets. The amending order before the Committee will extend the supplier obligation policy framework to December 2012 and significantly refocus it over that period. It will act to drive investment and secure jobs in energy efficient industries, ensure that households and the UK more broadly save energy and money, and reduce carbon emissions.
Before I turn to the detail of the order, let me remind noble Lords of the critical role I believe energy efficiency has as part of the transformation to a low- carbon society. UK households spend £20 billion on energy each year, mostly on electricity and gas, and account for 30 per cent of all the energy consumed in the UK, thus directly contributing to climate change the energy used to heat our homes. Energy saving measures are therefore a win-win. They help to increase our energy security by reducing our reliance on imported fossil fuels, they provide environmental benefits by delivering carbon emissions reductions and local air quality improvements, and they support fairness by providing hard-pressed families with a simple means of saving money and protecting against cold, inefficient homes. They provide further economic benefits by creating employment opportunities in the manufacturing and service delivery of energy-efficient technology.
The UK’s housing stock retains substantial opportunities to improve its thermal efficiency. That is why we are putting in place our radical and ambitious green deal, to be established through legislation in the forthcoming Energy Security and Green Economy Bill. The green deal will be a game changer. It will take a long-term approach to energy efficiency, unlocking capital investment and transforming the landscape for home energy efficiency improvements. However, it is imperative that we maintain and, where possible, quicken the pace of energy efficiency investment and activity immediately while we develop and implement the longer-term green deal.
I know that there is a good deal of consensus around the importance of the issues that the order addresses, and I welcome that fact. The refocused and extended CERT will set suppliers a new, challenging carbon emissions reduction target, will focus the scheme on driving insulation measures and will help low-income households get an improved share of investments. It will act as an important bridge to the future, building momentum as we put in place the arrangements for the green deal.
I turn to the specific amendments that we are making with the order. In doing so, I thank those people and bodies who responded to the public consultation process across the spectrum of interested partners, including energy suppliers, the insulation industry and local authorities as well as environmental and fuel-poverty groups. Their contributions have been crucial in forming our decisions.
We will extend CERT to the end of 2012, increasing the target by 108 million lifetime tonnes of CO2 and setting a new overall target of 293 million lifetime tonnes of CO2. This increase equates to just over a 3 per cent cut in household greenhouse gas emissions in 2013. Given how far advanced suppliers are in meeting their existing targets, we will allow suppliers to start work against this new target immediately to ensure that customers’ access to energy efficiency measures is not interrupted.
We will act to stamp out the mistakes of the past by introducing a complete ban on the subsidy of halogen and compact fluorescent lamps, and will focus instead on installed measures. Through this order, we will require over two-thirds of the increase in the overall target to be delivered through professionally installed loft, cavity wall and solid wall insulation. This will provide the insulation industry with confidence to invest and will ensure that all customers who want to make a real difference to their energy bills and carbon footprint have cost-effective opportunities to do so. That means help for some 3.5 million households from insulation measures.
To ensure an equitable distribution of measures, and in the light of the rising blight of fuel poverty, we are creating a new obligation for those households that have the greatest need. Low-income pensioners, families with children and the disabled will form a super priority group. Further, each benefiting household will be required to receive a heating or insulation measure. That means an estimated 600,000 such measures professionally installed in the most vulnerable homes, and over £400 million focused on helping the very poorest. Additionally, we will provide vulnerable households with continued support for microgeneration measures under CERT, such as heat pumps and solar water heating.
Our building block for targeting these vulnerable households is the energy rebate scheme, now aimed at a subset of pension credit claimants. We expect up to 250,000 pensioners on low income to receive a rebate worth £80, meaning up to £20 million under this scheme. These vulnerable households can go on to be targeted with supplier offers under CERT.
Overall, the CERT extension will have a significant positive impact on fuel poverty, with approximately 175,000 households expected to be provided with measures that provide them with a long-term solution to fuel poverty. Many more households will receive measures that will protect them from falling into fuel poverty.
In summary, the reshaping of the scheme that this order represents will help deliver a step change in insulation rollout and maximise the scheme’s contribution to environmental and social ambitions. I call on your Lordships to support this legislation in order to bring new impetus to the household energy efficiency agenda with immediate effect and ensure that we can best serve the interests of the economy and the public. I commend the order to the Committee.
Lord Jenkin of Roding
My Lords, I welcome what my noble friend said. He explained briefly the reason for the urgency of the measure; that point has been made to me by some of the interested parties. They desperately need to know where they stand at the end of the existing second phase of the CERT programme. As my noble friend said, the order provides a continuation up to the end of 2012.
However, perhaps my noble friend will comment on one of the consequences of the urgency with which the Government have brought forward the measure. I have in front of me the Merits Committee’s report. Under the heading, “Other instruments of interest”, it refers to this order. The paragraph ends:
“However, given the speed with which the Government wishes this SI to proceed, the Committee has not had the opportunity to make any detailed assessment of the instrument”.
I say with kindness to my noble friend that that requires some explanation. It is not satisfactory that this House should have a Merits Committee, which examines matters in the field of statutory instruments which are of interest, but which is precluded simply for shortage of time from being able to offer its comments.
We will have to do the best that we can. The report was published only last Thursday, on 22 July. It has been quite difficult to keep up with what has been going on. Obviously, I will have to do my best. There has been very little opportunity to consult with those outside, but it is a very complicated issue—not so much the changes that my noble friend has outlined, which are themselves quite complex, but the documents that accompany the order are very large. We have had the summary of consultation responses and the government response, a document running to no fewer than 50 pages, and the impact assessment, which runs to 77 pages. Like other noble Lords who have been faced with those documents at short notice, my questions to the Minister may seem naive and ill informed, but I shall have to do my best.
I found it a depressing experience to read the order, the consultation document and the impact assessment with which we have been supplied. That is not because the CERT scheme is undesirable; when we have debated the order’s predecessors, I have made the point firmly that the need to attack and deal with the poor quality of much of our existing housing stock is of huge importance, both to make life a bit more comfortable for the inhabitants and, as the Minister rightly pointed out, to achieve higher energy efficiency. What depresses me is its extremely complicated and bureaucratic method of achieving that.
I have had occasion to criticise that in the past and, although I have the copies of Hansard here, I promise noble Lords that I will not repeat what I have said on previous occasions. If anyone doubts whether it is bureaucratic and complex, just skim through the 77 pages of the impact assessment. That must have required a huge number of man hours to prepare for publication. One really has to wonder whether all that is necessary. I shall return to that point towards the end of my remarks.
In the mean time, I have a few more detailed questions to address to my noble friend. I turn at once to the major change in the order—the new super priority group. I can well understand the aim and have a good deal of sympathy with it. I should declare an interest: I am a member of the priority group. As such, I was able to get my house insulated—both loft and cavity wall insulation. I shall not repeat the horrors of that experience, but it filled me with a strong impression that the biggest single barrier we face is household hassle.
Under the priority group, 40 per cent of the carbon savings must come from people who enjoy a range of benefits or are pensioners aged over 70. The noble Lord, Lord Hunt of Kings Heath, will recognise that we have frequently had to complain about the difficulty for the suppliers who have to operate the scheme identifying the households that qualify for that treatment. I dealt with that two years ago under the 2008 order and again last year under the 2009 order. One concession was made by the Minister's predecessors. Under the Pensions Act, we had an order which allowed information to be shared on what was a very limited category of those in the priority group—namely, pension credit beneficiaries. No doubt that has been helpful. The data protection rules make it impossible for there to be a general exchange of names and addresses of people who fall within the various categories of beneficiary under the social security legislation.
Therefore, the companies which have to operate the scheme are reduced to other methods to try to find the people in the priority group, including cold calling and, much more intelligently, looking at areas and cities where they might expect to find a higher concentration of people in receipt of the various benefits. The point was made to me again this morning that that is a very unsatisfactory process which costs them a lot of money. It increases the cost of administering the whole scheme.
In the order, we are now faced with a new category, the super priority group. If anyone is any doubt about that, paragraph 3.2 of the order spells out the definition of those who are in the super priority group. It is nearly a full page long. Does my noble friend have a better answer than did his predecessors as to how on earth the companies are supposed to find out who those people are, so that they can approach them and, if they agree, insulate the houses in the way we all want?
I turn to the consultation. I will not weary noble Lords with the detail, but at paragraph 8.4 of the results of the consultation, there were many conflicting answers on how that problem should be tackled. I do not see any advance in the order on what has gone before. That is my first question.
My second question relates to the concept of market transformation measures. Again, there is an elaborate definition of that in subparagraph (4) of paragraph 3. Paragraph 7.4 of the Explanatory Memorandum spells that out in some detail. The second point in that paragraph states:
“CERT supports innovation and energy saving products and appliances”—
which my noble friend very properly mentioned in his speech—
“by providing a 50% increase in carbon score to qualifying products. The market transformation baseline”,
is set out in the 2001 order, thus going back some years.
“This means that a measure which saves carbon but was not promoted under the 2001 Order can be promoted as a market transformation action under the CERT order. However, we will increase the baseline to measures which have not been promoted under the …Order 2004. This will mean that suppliers need to come forward with new products or similar products which are no less than 20% more efficient than products promoted under the previous scheme to March 2008”.
I have hunted through the order, I hope with care, but I cannot find where the figure of 20 per cent comes from, so I would be most grateful if my noble friend could explain where in the order is the uplift, as it were, of 20 per cent which needs to be met. It is set out in the Explanatory Memorandum but I am quite unable to find it in the order.
Lord Marland
My Lords, as always, it is a great pleasure to enter into a debate with such eminent gentlemen who know so much about the subject. Perhaps I may deal with the points raised in consecutive order. I note the comments of the noble Lords, Lord Jenkin and Lord Hunt, that this order should have gone through the Merits Committee. You’re damned if you do and you’re damned if you don’t. It is worth pointing out that the Joint Committee of both Houses that scrutinises statutory instruments did not think that it needed drawing to the special attention of both Houses. This legislation is in operation and all we are doing is seeking to extend its lifetime. We have had three months of public consultation; some 102 companies have been consulted, as have the big six and their agencies. The whole point here is to keep up the pressure on an existing programme to build the bridge between now and the green deal.
This programme is being filled quickly—probably quicker than we predicted—and we now have an opportunity to keep up the pressure. It would be wholly wrong to tear up the current programme while it is in force and particularly while we are planning the green deal to which the noble Lord, Lord Jenkin, referred. We completely understand the bureaucratic and complex nature of the current arrangements, and I give the noble Lord the commitment that the green deal will seek to address that. As regards his point on difficulty of suppliers, that is a practical issue. Some people have no difficulty with them, while others do. We hear positive remarks and I am sorry that he experienced difficulty. Perhaps if he joins the super priority pension group, it might be a different thing altogether.
Lord Jenkin of Roding
My Lords, I am tempted to regard myself as being very poor, but I am not as poor as that.
Lord Marland
We are deeply gratified to hear that. Of course, it is easy to data-share under the Pensions Act 2008 as it commits to providing data. I am afraid therefore that I do not agree that it is difficult to find out who the relevant people are. Any work with local charity groups and local authorities adds to the information flow. This is not therefore a change; it is an extension of a policy. It gives us time rightly to re-examine his points about bureaucracy and difficulty of commitment.
As regards cost, raised by a number of noble Lords, it is £50 to customers. It is an increase from £41. However, against an average bill of £1,124, it is a worthwhile commitment to the cause. Climate change is not the main driver—this is reducing carbon throughout the supply and we must differentiate between the two. The noble Lord, Lord Jenkin, rightly mentioned the Hartwell report—not for the first time. We have three days of debate coming up. I will lay a private bet that it will be mentioned every day and I look forward to the noble Lord doing so. I believe that the writers of the Hartwell report will see the green deal as an opportunity for their recommendations to be examined. It will give us the opportunity to take their views into account.
The noble Lord asked where legislation states that market transformation requires a 20 per cent improvement on existing products. I repeat that to him as said because it is important that we understand it. I will give him the officials’ response, which is that the CERT legislation details that uplifts will be applied if a significant improvement in efficiency is achieved to previously promoted measures. Ofgem, the scheme’s regulator, has indicated that a 20 per cent improvement is the minimum requirement. Ofgem consulted with suppliers and other interested parties before providing this figure.
My noble friend Lord Reay asked about priority groups and super priority groups and how they are going to be funded. I confirm to him that they will 100 per cent generally be funded. He asked questions about how carbon savings are assessed, especially comfort-taking. Comfort-taking is considered in the impact assessment calculation for the carbon savings, and if he would like more information on that, I would be happy to invite him to discuss it with our officials later.
Climate Change
Debate between Lord Jenkin of Roding and Lord Marland(14 years, 1 month ago)
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Lord Marland
Yes, he was, absolutely. I thank noble Lords for listening to what I am saying. That is a great start. He was encouraged to set up a plan for the Green Investment Bank, which he has done. Therefore, he is not a government adviser. He has pointed us in a number of directions in terms of reforming the climate change market and we are grateful for his views.
Lord Jenkin of Roding
My Lords, in the debate on the Queen’s Speech, I drew the House’s attention to the recently published Hartwell paper, which argues that there needs to be a new approach to dealing with the huge problem of climate change, to which my noble friend has referred. Will he give me an undertaking that the Government will study the Hartwell paper, as it seems to me to have a good deal of wisdom in it?
Lord Marland
My Lords, I thank the noble Lord for inviting me to comment on the Hartwell report as I have studied it, which gives me a few brownie points. It raises a number of points of interest, some of which we agree with and some of which we do not. Among other things, it draws attention to the need for energy efficiency, which is high on our list of priorities, and investment in non-carbon energy supplies, which again is high on our list of priorities and is hard to argue against. A lot of things in the report were agreeable but some were not. We shall consider them in the recess and bring them together in a debate in the autumn.