Climate Change
Debate between Lord Roper and Baroness Verma
Baroness Verma
The noble Lord is absolutely right. Of course, we have seen a real increase in the low-carbon sector; in the renewable sector itself we have seen since 2010 over £36 billion of investment come to the UK. It is a £3.2 trillion global marketplace out there, of which we have a fair share of £128 billion. There is much more to do. There are great opportunities. As last week showed, Siemens sees the UK as an ideal place for investment, by investing over £300 million in Hull.
Lord Roper (LD)
How will the results of the intergovernmental panel affect the position that the Government and their European Union partners are developing for next year’s framework convention conference in Paris?
Baroness Verma
My Lords, my noble friend knows of course that we work very closely with our European partners. We will of course push those that are slightly slower in coming forward in reducing their carbon emissions to do much better. We all need very ambitious targets. I hope that the conference will see that.
Energy: Gas Storage
Debate between Lord Roper and Baroness Verma
Baroness Verma
Of course. As I said in my original Answer, we will see an increase of more than 20% in the capacity of gas storage. However, as the noble Lord asked for further figures, as my noble friend did, I will make sure that they are placed in the Library.
Lord Roper (LD)
My Lords, in the initial reply of my noble friend the Minister to the noble Baroness, Lady Worthington, she suggested that any further intervention in gas storage would raise prices disproportionately for consumers. Will she let us know the basis for that?
Baroness Verma
My Lords, we have carried out an analysis of the UK gas market to see the potential for intervention against potential shocks, and have found that there is a wide range of figures. However, they are still hugely substantial as regards the net benefit to consumers and the population as a whole.
Energy Bill
Debate between Lord Roper and Baroness Verma
Baroness Verma
My Lords, government Amendment 3 responds to a recommendation from the Delegated Powers and Regulatory Reform Committee regarding delegated powers in the capacity market. I am grateful to the committee for its recommendation and to my noble friend Lord Roper for raising it on Report. Amendment 3 will limit the powers of the authority to make capacity market rules and to confer additional functions on itself when exercising powers under Clause 34(3). It will do this by requiring the authority to obtain the Secretary of State’s consent on each occasion that it seeks to confer a function on itself when making capacity market rules. This will ensure that there is a sufficient level of oversight when the authority makes changes to the capacity market rules. I hope that my noble friend finds the explanation of my amendment helpful and I beg to move.
Lord Roper (LD)
My Lords, I thank the Minister for having put forward this amendment which, as she says, follows the discussion that we had on Report and the report of your Lordships’ Delegated Powers and Regulatory Reform Committee. It is a most satisfactory amendment and, again, I thank the Minister for it.
Energy Bill
Debate between Lord Roper and Baroness Verma(11 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text
Baroness Verma
My Lords, I thank all noble Lords for their support for this amendment and the noble Lord, Lord Roper, for speaking on behalf of the noble Baroness, Lady Maddock, to her amendment. These amendments would place in the Bill a requirement that information in consumer energy bills must be,
“provided in a form that is clear and easy to understand”.
My noble friend Lady Maddock raised the importance of this at Second Reading and in Committee, and the Government agree it is vital. Ensuring consumers are provided with clear and simple information regarding their existing tariff and others available to them is one of the key aims of the powers in question, and of Ofgem’s retail market review. I am therefore very grateful to my noble friend for bringing forward these amendments and I can confirm that the Government are happy to accept them.
Baroness Verma
My Lords, Amendments 101, 103 and 104 make the order-making power relating to domestic tariffs in Clauses 130 and 131 subject to the negative resolution procedure. This was a recommendation of the Delegated Powers and Regulatory Reform Committee. I again thank the committee for its consideration of the Bill. The Government agree that the recommendation would be an improvement, so I will move these amendments to give effect to it.
Lord Roper
My Lords, I welcome the response that the Government have made to the report of the Delegated Powers and Regulatory Reform Committee. This and other recommendations were raised in Grand Committee. In virtually every case the Government have been able to come back and accept those recommendations.
Energy Bill
Debate between Lord Roper and Baroness Verma
Baroness Verma
My Lords, I thank my noble friends Lord Roper and Lord Jenkin, and the noble Baroness, Lady Liddell, for their amendments on the issue of route to market for independent renewable generators. Taken together, these amendments would place the Secretary of State under a duty to ensure that: a PPA scheme is in place by the time the first contracts for difference are allocated; the terms of PPAs under the scheme are demonstrably viable for eligible electricity generators and will enable them to borrow money on reasonable terms; eligible generators can obtain a PPA under the scheme within seven days; and that all generators eligible for a CFD are eligible for a PPA under the scheme.
I am grateful to noble Lords for the opportunity to clarify the Government’s intentions, which are very much in keeping with the spirit of these amendments. I assure the House that, as my right honourable friend Michael Fallon has said, the Government are committed to consulting on the introduction of an offtaker of last resort mechanism, and that they intend, subject to consultation, a scheme to be in place by the time the first CFDs are signed. That will give generators and investors the certainty that they need to make investment decisions. However, it would not be appropriate to place the Secretary of State under a duty to establish a scheme by a particular date before the final policy design has been completed and consulted upon.
The Government are also committed to ensuring that the mechanism is viable for eligible independent generators, which should enable generators to borrow money on reasonable terms. However, the Government cannot guarantee that, since access to finance and the viability of the scheme for individual generators are affected by a variety of factors that are out of our control. We also fully intend that those generators which need to access a PPA under the scheme will be able to do so quickly and simply via a transparent and fair process.
It is important that the scheme is targeted at those generators which genuinely need to access it. The scheme may not be suitable or necessary for all CFD-holding technologies, so we do not judge that it is appropriate for this to be required in primary legislation. I also assure the House that the Government intend to grandfather the terms of PPAs under the scheme, including the level of discount, from the date a generator signs its CFD.
I met with the Independent Renewable Energy Generators Group last week to reassure it on these points. It confirmed that it believes that the offtaker of last resort is a viable solution to its concerns, subject to the final decision—sorry; subject to the final design. The details of the offtaker of last resort mechanism will be specified in secondary legislation following consultation early next year, so it is not appropriate at this stage to set them out in the Bill. I reassure noble Lords that we aim to have secondary legislation in force by the time the first CFDs are signed. This is a challenging timetable. It is subject to consultation and parliamentary process. However, this should not have a material impact on generators since they will not need access to backstop PPAs until after projects have been commissioned, which is likely to be several months after signing the first CFD.
Noble Lords also asked when the first CFD allocations will become available. We have already signalled that we intend to consult, possibly in the early new year, and aim to have secondary legislation in force by the time of the first CFD. I hope that I have reassured noble Lords that the Government’s intention is to ensure certainty for smaller generators. We want to see greater competition. We believe that the measures we are taking and the mechanisms we are using are the right ones. I hope that the noble Lord will find my explanations reassuring and will therefore agree to withdraw his amendment.
Lord Roper
I am grateful for the support my amendment has had from all parts of the House. I am also grateful that the Minister has listened to what has been said and, indeed, made some reassuring comments. I am certainly reassured to a significant extent. She said that she wished to act in keeping with the spirit of the amendment and I am happy about that. I also understand the constraints imposed upon her by the consultation. However, I return to one of the points I made in introducing the amendment and that comes back to a phrase she used, which I hope I understood. She said initially the final “decision” and then moved on to say the final “design”. I believe that she meant the final design; that is, not whether or not there will be an offtaker of last resort but how it will work—the design for such an offtaker.
Lord Roper
My Lords, that is indeed a very reassuring statement. It suggests that the Government are moving in the direction that we wish. I suspect it means we will not need to return to this at Third Reading. We have had some useful assurances today and, on the basis of that, I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Roper and Baroness Verma
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I shall speak also to the other government amendments in this group. These changes provide important clarifications to the implementation of contracts for difference and in addition respond to a number of recommendations made by the Delegated Powers and Regulatory Reform Committee, for which the Government are very grateful. This group also contains a number of minor but essential and consequential amendments.
Amendments 16 and 38 on contracts for difference give the Secretary of State the power to issue and revise standard terms for contracts for difference, subject to consultation and under an explicit duty to consider the matters listed in Clause 5(2), and to publish those standard terms. Amendments 17 and 19 enable provision to be made for how the system operator will notify the CFD counterparty that an eligible generator has been allocated a CFD and, in turn, how the CFD counterparty is to offer a contract to an eligible generator.
Amendment 18 provides for the Secretary of State to set out how the system operator will run the allocation process, in particular through an allocation framework, which will cover such areas as: the process to be used, such as the competitive process in the event of a constraint; the timing of allocation rounds; and any targets, such as minima and maxima, which the system operator will need to consider. The Government are seeking to include this sort of provision in an allocation framework, as opposed to in a statutory instrument, because these are issues that might need to change at short notice in order to manage costs and to ensure value for money along with the smooth functioning of the allocation process. However, it is important to note that the allocation framework will not be free-standing. Provision for an allocation framework will need to be set out through regulations, which will be subject to the affirmative procedure.
Amendment 20 gives the CFD counterparty the power to agree minor and necessary modifications to the standard terms, prior to contract signature. This ensures that the CFD regime is open to the widest possible range of eligible generators, while maintaining a level playing field. Amendments 13, 14 and 15 are consequential amendments, recognising that Clause 10 now refers only to contracts for difference that result from bespoke negotiations with the Secretary of State. This is because powers for contracts for difference that result from allocation by the system operator now have their own clause.
Amendment 21 enables provision to be made in regulations to enable calculations or determinations required by the regulations. Such calculations or determinations are to be made by specified persons—for example, the CFD counterparty. Amendments 6, 10, 26 to 37 and 39 are all consequential to the principal amendments that I have set out.
Amendments 8, 56 and 44 move most secondary legislation relating to contracts for difference, investment contracts and the capacity market to the affirmative resolution procedure, increasing parliamentary oversight in accordance with the recommendations of the Delegated Powers and Regulatory Reform Committee. Amendment 56 also goes beyond the committee’s recommendations by making all secondary legislation in Parts 1 and 3 of Schedule 2 subject to the affirmative procedure. This ensures that the provisions in Schedule 2 are consistent with the equivalent provisions in Chapter 2 on contracts for difference.
Amendment 40 also responds to the committee’s recommendations by preventing the authority—Ofgem—from conferring additional functions on itself when exercising the powers under Clause 28(3) to make capacity market rules, except with the consent of the Secretary of State. However, since tabling this amendment, the DPRRC has provided a further report and makes a recommendation in relation to this, which I will be considering carefully ahead of Third Reading.
Amendments 9, 45 and 57 make explicit provision that regulations made under contracts for difference, the capacity market and investment contract powers will not be treated as hybrid. I have tabled these amendments because the secondary legislation implementing EMR may specify determinations made by Elexon for the purposes of settlement of payments under these powers. As such, the regulations may potentially be considered hybrid and subject to investigation by the Hybrid Instruments Committee. The Government do not think that this is necessary or appropriate, as the existing duty to consult before making regulations will ensure that Elexon’s private interests are fully considered. My department is already working closely with Elexon, which has also confirmed that it has no objections to these amendments. To avoid the risk of delay to the programme and the investment that it will bring forward, I have tabled these amendments to make it clear that no hybridity will arise.
Amendments 11, 12 and 58 are minor drafting amendments with no impact on the substantial legal effect. They have been tabled in order to avoid any perception that we are giving the counterparty new powers to recover moneys owed to it. Amendment 46 is another minor change to make it clear that the duty to consult before making capacity market rules can be satisfied by consultation undertaken before Royal Assent. This aligns Clause 35 with other provisions of the Bill, such as Clause 18(2) and Clause 34(3).
Finally, Amendments 52 to 55 are minor and technical drafting amendments to clarify that an investment contract will continue to be an investment contract even where a party ceases to be an “electricity generator”, and that the definition of an “investment contract” is satisfied if at least one generator is under an obligation to make payments under the contract. I hope that noble Lords find that a helpful explanation of the government amendments and I beg to move.
Lord Roper (LD)
My Lords, I have tabled Amendment 41 in this group to give the Minister an opportunity, to which she has already referred, to respond to the 11th report of the Delegated Powers and Regulatory Reform Committee. The committee felt that the proposal in Amendment 40 was not satisfactory as it would still give the authority power to confer functions on itself without the consent of the Secretary of State, even though the proposed new subsection would allow for such consent to be given generally in relation to the capacity market rules of a particular kind. In its report, the committee did not find that a totally satisfactory response. I ask my noble friend whether she will be able to give some consideration to this point and perhaps bring back at Third Reading an amendment to Amendment 40, which will go some way to respond to the committee’s report.
Baroness Verma
My Lords, In Committee, a desire was shown for more detail on the pilot: when it will happen, how long it will last and when the results will be reported. A demand-side response—short-term load shifting—is already part of our plans for a capacity market. The Government’s preference is that electricity demand reduction—permanent reductions in demand through the efficient use of electricity—can also join the capacity market in the future. However, given the uncertainties around a financial incentive for efficiency and its operation in the capacity market, we intend to pilot this approach before drawing conclusions. This work is a priority and, since Committee, the Secretary of State has announced the availability of at least £20 million for the pilot, which is expected to start in summer 2014 and run for around two years.
There have been calls to provide assurances that information on the outcome of any electricity demand reduction pilot would be provided to Parliament. In line with best practice, it was already the Government’s intention to report the results of the pilot. However, in order to reassure the House, I am moving this amendment so that reporting the results of the pilot to Parliament becomes a statutory requirement. That will be done as soon as practicable after the results of the pilot are available. I beg to move.
Lord Roper
My Lords, the noble Lord, Lord Jenkin, and I have Amendment 48 in this group. The group also includes Amendment 51, tabled by the right reverend Prelate the Bishop of London, which would insert a new clause.
When the draft Energy Bill was published in May 2012, a number of people were concerned that there was not sufficient indication of measures to reduce electricity demand, which is obviously the most satisfactory way of avoiding having to build further power stations. Both in the pre-legislative scrutiny in another place and in the informal committee chaired by the noble Lord, Lord Oxburgh, the question of demand-side measures was discussed. As a result of that, the Government launched a consultation in November last year and suggested a number of options for electricity demand reduction. Interestingly enough, out of the options on offer, a majority of the respondents favoured a system of electricity efficiency premium payments, which would provide electricity users with a payment on top of the savings that result from reduced use of electricity.
However, when DECC published its consultation response in May this year, it suggested that its preferred route to delivering permanent reductions in electricity demand was via a capacity market. That was of course contrary to the majority of the views expressed in the consultation. Similarly, the response dismissed the idea of introducing a premium payment without adequate explanation. None the less, on Report in another place, the Government introduced Clause 37, allowing the Government to run a pilot scheme for electricity demand reduction. The clause does not explicitly limit the Government to a single pilot or specify the mechanism that they might use. However, given what the Government said in their response to the consultation, there is a pretty clear indication that they wish to look at the capacity market only.
There are a number of uncertainties about the appropriateness of the capacity market, particularly for small and even medium-sized consumers. I am not sure what the right reverend Prelate might say about churches which are considering reducing their electricity demand and whether they would be large enough consumers to go into such a capacity market. None the less, there was a discussion in Grand Committee on an amendment that I tabled suggesting that there should be more than one pilot so that various methods could be explored as ways of dealing with this question of electricity demand reduction. Amendment 48, which I and the noble Lord, Lord Jenkin, have tabled, requires the Government to bring forward multiple pilot schemes so that not just the capacity market but premium payments and perhaps some other form of incentive could be considered. That would demonstrate which scheme or schemes might be most effective in delivering permanent demand reductions and scale.
I very much hope that the Government will give serious consideration to this proposal because I believe it will give us rather more information as a result of the pilot in order to make decisions as to what can be done. I should say that I have a good deal of sympathy with the new clause tabled by the right reverend Prelate which calls on the Government to prepare and implement a strategy for delivering further reductions in demand which the Government themselves say is achievable.
Energy Bill
Debate between Lord Roper and Baroness Verma
Lord Roper
My Lords, I support the noble Lord, Lord Grantchester, on this amendment. I believe that we have a responsibility on behalf of the House to follow the report of our Delegated Powers Committee. Although I was in some ways disappointed, in other ways I was relieved when I saw in the Forthcoming Business published this morning that we will not be reaching Report stage in the first three weeks after the Recess. That will give the Government time to have these regulations published and for the House to examine them carefully. I was worried that we would get them just before we came back without a proper opportunity for discussion. I would be very grateful to have reassurance from the Minister that the regulations will be available in good time for Report.
Baroness Verma
My Lords, I thank the noble Lord, Lord Grantchester, for his amendment which would implement the recommendations of the Delegated Powers and Regulatory Reform Committee. It would require that all regulations made using the powers in Schedule 2 should be made using the affirmative procedure, apart from regulations made under paragraphs 10 and 11 on the provision of information and advice. These would need to be made using the affirmative procedure the first time such regulations are made.
I welcome the Committee’s scrutiny of the Energy Bill. As I have previously mentioned, the Government are carefully considering the recommendations of the Delegated Powers Committee’s reports and will respond in due course. I reassure the Committee that throughout the Summer Recess, Ministers and officials will be working very hard to try to provide as much information on the regulations as soon as we can. We intend to consult from October on the detailed implementation of the EMR, which will give noble Lords an opportunity to scrutinise the detail ahead of Report. Further details of our plans for secondary legislation can be found in the memorandum we recently sent to the Delegated Powers and Regulatory Reform Committee. I hope that with this reassurance that we will be working extremely hard to try to satisfy not only him but the Members of the Committee the noble Lord will withdraw his amendment.
Baroness Verma
My Lords, I am extremely grateful to my noble friend Lord Roper for moving the amendment on behalf of the noble Lord, Lord Cameron. I hope that I can address the points made by my noble friend and other noble Lords and assure him that the practice adopted for the assessment of these projects for non-domestic rates is fair and consistent.
Non-domestic rates, otherwise known as business rates, are a tax on properties that are not domestic and capable of beneficial occupation. Most onshore renewable generating power stations, such as hydro or wind plants, are non-domestic properties and, therefore, liable for business rates. The amendment would give a tax break from business rates for hydro plants with a capacity of 1.25 megawatts or less, provided they were on the operator’s domestic premises. It would mean that two otherwise similar plants would be treated differently for tax purposes merely because one was located next to the owner’s house. I do not think that that would be a fair outcome for this sector.
The amendment raises some good questions about when plants at domestic properties should be assessed for business rates. I hope that on that point I can offer the noble Lord some assurances that the business rates system operates fairly. The rating list is maintained by the Valuation Office Agency, which is responsible for deciding when an installation should be assessed for business rates and for assessing its rateable value. In this regard, the Valuation Office Agency acts independently of Ministers, and we cannot therefore intervene in its decisions. However, we are aware that during 2010-11 the VOA undertook a review of hydro projects to ensure that all facilities that should be considered non-domestic were assessed for business rates. In some cases, these installations were located in the grounds of what would otherwise have been domestic premises. Where a hydro facility is considered to be domestic—for example all installations under 10 kilowatts—it is included in the council tax assessment of the house. Larger installations may also be considered domestic if the output of the plant is being used to provide power to the living accommodation. However, other projects where the output is being sold to the grid are assessed separately for business rates. This means that the smallest domestic hydro projects, which in the main are used only to provide power to the owner’s home, are not caught by the business rates system. Only those larger projects, where more power is exported and sold to the grid, are assessed for business rates.
In the evaluation of larger hydro projects, I can assure my noble friend that the Valuation Office Agency’s model has been adopted specifically to deal with the lack of direct rental evidence. Renewable energy plants, such as wind farms, hydro schemes, PV installations and anaerobic digesters, are assessed using a receipts and expenditure method of valuation. This is because the value of such properties is very closely related to their trading position and their ability to make profits. The costs of generating power at an electricity generator and the earnings from the sale of that power are tangible evidence of assumed rental value. The model is also based on a fair and maintainable forward projection of output averaged over a number of years, and the figures used are derived from actual outputs received from occupiers. Additionally, a ceiling level of output equivalent to a 40% load factor has been applied to the model, even though some schemes generate at well in excess of this level. The model also allows for borrowing costs and is consistent with the general application of receipts and expenditure valuations. I hope that the noble Lord agrees that this is a fair approach to drawing the line for this tax and that it ensures consistency across the sector.
I should also point out that more than 500,000 businesses in England benefit from the small business rate relief scheme, and about a third of a million of them pay no rates at all. We anticipate that many domestically based hydro schemes will benefit from the small business rate relief scheme, provided the owner does not operate any other non-domestic premises. We have also given authorities powers to provide their own discounts, which they can use to provide further support for hydro projects. Should they do so, central government would meet 50% of the costs. In addition, the Government’s feed-in tariff scheme supports the deployment of hydro, and as the noble Lord will recall from earlier in our proceedings, we are planning to extend the scheme to 10 megawatts for community projects.
I hope that I have assured my noble friend that the non-domestic rating system is built on a reasonable set of rules, which decide fairly which projects should be assessed for business rates, and that we have taken steps to cut bills for small businesses. In the light of that, I hope that he will withdraw his amendment.
Lord Roper
My Lords, I am grateful to all noble Lords who have taken part in this short debate. I was particularly interested by the intervention of the right reverend Prelate. The role of communities in developing microgeneration, although slightly different from the case of houses, is quite important, and we have seen a number of other useful examples of this. I believe that it is a way of making an important contribution to renewables that does not necessarily have too many disagreeable environmental impacts, in spite of what the noble Lord, Lord Whitty, said in his intervention. From the points that he made, I now understand that this is an area where some more unintended consequences may occur; the impact on anglers and others was something to which I had not previously given full consideration.
I am also grateful to my noble friend the Minister for her full and detailed response, in which she explained the context of the non-domestic rating of microhydro. The noble Lord, Lord Cameron, will want to read the Minister’s reply. Although I wish to withdraw the amendment at this stage, he may wish to return to the issue on Report. I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Roper and Baroness Verma
Baroness Verma
I thank the noble Baroness for that. I recognise the concerns that noble Lords have rightly shown. We are keen to see greater competition and choice in the market. As I said, through the summer we will be looking at those issues in much more detail and working with stakeholders.
Further to that, I hope that my explanations have been persuasive enough for noble Lords not to press their amendments and to support the government amendments.
Lord Roper
My Lords, I am very grateful to all those who have taken part in what I believe has been a useful and constructive debate. There are three things on which we all agree. First, we all agree that it is difficult to find an effective system to achieve something which we believe should be achieved. Secondly, we are grateful that the Government have moved and produced the set of amendments which they tabled last week on the backstop PPAs, even if we find them somewhat difficult to understand in their detail. Thirdly, we agree that there is still much to be done to get a workable and straightforward system.
Although the noble Baroness, Lady Liddell, is, alas, not with us at the moment, I reinforce what she said about the importance of having a clear position on the road to market set out to reassure the independent generators and enable them to get access to the capital which is clearly essential if we are to have continued growth. We will probably continue to disagree about “duty” or “power”, but we have already considered that in other places. The point that the noble Baroness and others have made is that whereas it may be necessary for it to be here now, there may be a time when it will not be necessary and that duty may be a somewhat unsatisfactory constraint on the Secretary of State.
My own preference, if it can be worked out satisfactorily, is that the backstop PPA probably has advantages over the GPAM. However, because we are not certain that one will be able to develop a satisfactory backstop PPA, the proposal in the amendment in my name and that of my noble friend and others is probably advantageous because it gives us a reserve power.
On two of the other points raised by the Minister as to whether GPAM would require a backstop, there are obviously different views. The independent generators’ bankers tell them that it is necessary for the GPAM to be in existence for the whole period of the CFD rather than having a backstop. However, that is a matter on which there is more than one view and it will need to be considered.
I will need to be sure—we do not have time today—that the example given by the noble Lord, Lord Cameron, of the existing role of the NFPA and the possibility of it being developed into a GPAM did not have rather more to it than was suggested by my noble friend the Minister in her reply.
I am grateful for what the Minister said about Amendment 55AGA and I am glad that the Government will look at it with care between now and Report.
I hope that by the time we come to Report we will have a clearer picture of what is likely to be on offer. It is therefore my pleasure to withdraw my amendment at this stage but I fear that we may find ourselves debating this matter at some length later in the year.
Energy Bill
Debate between Lord Roper and Baroness Verma
Lord Roper
My Lords, I do not intend to delay the Committee unduly on this point, but I echo what has been said by the noble Lord, Lord Grantchester, and my noble friend Lord Crickhowell. I have spoken before on the remarkably trenchant language which the Delegated Powers and Regulatory Reform Committee used in its fifth report—and, in its sixth report, as we have heard from the noble Lord, Lord Grantchester, it is still very concerned, particularly on the regulations on the capacity market that we are considering. Therefore, it is essential that we have detail of the regulations that are going to be introduced well before we come to Report.
Baroness Verma
My Lords, I am extremely grateful to my noble friend Lord Jenkin and the noble Lord, Lord Grantchester, for prompting this debate on the delegated powers within the capacity market and contract for difference provisions.
Clause 26 enables the Secretary of State to make provision to impose requirements, via electricity capacity regulations, in addition to those stipulated in capacity agreements. The requirements can be imposed on persons including licence holders, other persons carrying out functions in relation to capacity agreements and current and former capacity providers.
I understand that my noble friend Lord Jenkin is concerned that the provisions in this clause are too broad. However, the Government consider that the ability to address this provision in secondary legislation is needed as the requirements may change with time. The need to consider certain matters when preparing advice regarding the operation of the capacity market may also change as the market evolves, as has been the experience in international capacity markets, such as those in the United States.
With regard to Clause 26(3)(b) about placing restrictions on the use of generating plant, certain requirements may need to be imposed to ensure a fair and transparent auction and to mitigate or close off gaming opportunities that could otherwise drive up costs for consumers. In particular, it is imperative that we know the range and type of capacity, irrespective of whether the capacity operator intends to bid at auction, and we need to ensure we can address gaming opportunities, such as a plant operator notifying its intention to close in order to drive up the capacity price. Clause 26(3)(c) allows the Secretary of State to impose requirements relating to participation in a capacity auction. An example of how we envisage using this power is that we may wish to require a plant to participate in a capacity auction if it has notified the delivery body during the pre-qualification process that it is its intention to do so.
It may be necessary to place other requirements on those who have ceased to be capacity providers—that is to say, they have assigned or traded their capacity agreements—in order to determine whether they complied with their obligations while they held the agreement. For example, requirements relating to the inspection of plant or property other than as a condition of entry into a capacity auction, as described in Clause 26(3)(d), may be imposed by the Secretary of State.
The powers in Clause 32 allow the Secretary of State to amend or repeal certain sections of the Electricity Act 1989 and the Energy Act 2004 and to make subsequent amendments to any other enactment as the Secretary of State considers appropriate as a result of provisions made by electricity capacity regulations or capacity market rules. I recognise that my noble friend has particular concerns over the provisions in paragraph (d), which allows the Secretary of State to make consequential amendments to any other enactment that he considers appropriate. I should emphasise that our intention is to limit the use of the power in Clause 32(d) to making amendments that are consequential on, or to avoid duplication and contradiction of, existing primary or secondary legislation on implementing the capacity market. For example, if we modify the standard conditions of licences under the provisions of the Electricity Act, the powers for which are set out in Clause 31, it may be necessary to make a consequential amendment to Section 33 of the Utilities Act 2000. This contains general provision about standard licence conditions and includes in Section 33(1) a list of powers under which licence modifications have been made. Furthermore, any provisions to amend primary legislation through the powers in this clause will be subject to a proper level of parliamentary scrutiny through the affirmative resolution procedure.
I now turn to the amendments proposed by the noble Lord, Lord Grantchester, relating to the level of parliamentary scrutiny of regulations made under Chapters 2 and 3 of this Bill. These amendments would make all regulations subject to the affirmative resolution procedure, aside from those relating to electricity capacity regulations: information and advice and those under Clause 7(10) which set out how long a person who has ceased to be a CFD counterparty is continued to be treated as such. These would be subject to the negative procedure. The amendments are consistent with the recommendations of the Delegated Powers and Regulatory Reform Committee. As I have said in previous debates, the Government welcome the committee’s report and I can reassure the noble Lord that it is being given careful consideration. I commit to consider the amendments further and will respond in due course. I commend that Clauses 26 and 32 stand part of the Bill, and hope that the noble Lord will feel content to withdraw his objection.
Energy Bill
Debate between Lord Roper and Baroness Verma
Baroness Verma
My Lords, I start by thanking the noble Lord, Lord Davies of Stamford, for his amendments. Like my noble friend Lady Maddock, I say from the start that we are putting consumers and fairness to new entrants at the heart of the Bill. It is important to note that the Government confirmed on 27 June our intention to initiate the capacity market, with the first auction taking place in 2014 for delivery from 2018, which would provide an insurance policy against any future blackouts. I reassure the noble Lord that it is the Government’s clear intention to implement the capacity market through regulations as laid out in this chapter. That can be delivered without a statutory requirement in the Bill, so the may/must argument does not need to be fought at the moment.
On Amendment 53ZZB, although the noble Lord’s intention behind the amendment is laudable, we believe that the Bill already makes sufficient provision for driving energy efficiency. The Bill lays out how the capacity market is intended to involve permanent electricity demand reduction in Clauses 29 and 37. The inclusion of electricity demand reduction in the capacity market is of course complex and, as such, its impact needs further examination and assessment. Because of that, we intend that an electricity demand reduction pilot will be carried out to assess the viability of incentivising demand reduction in the capacity market.
Secondly, the Government are already doing a large amount of work to encourage increased electricity efficiency of homes and small businesses—for example, through the Green Deal energy company obligation and smart meters. I urge the noble Lord to consider those measures available to low-income and vulnerable families. I also remind him of how the number of tariffs rose under his Government. When they were in power, it rose to 4,000 tariffs. Fuel poverty nearly doubled during the last five years when they were in power. We are addressing a long-term, deeply embedded problem. Passing the amendment without the result of the pilot being known would risk duplicating existing policies for the promotion of energy efficiency and could lead to contradictory or inefficient regulations.
Although I have been rather brief, I think my explanation should reassure the noble Lord that the Government are doing everything possible through the Bill to answer his concerns, and I hope that he will withdraw his amendment.
Lord Roper
My Lords, with reference to the regulations being referred to here and elsewhere, will my noble friend give the Grand Committee some indication as to how likely we are to have details of them before we come to Report?
Baroness Verma
My Lords, I will not be able to give my noble friend an answer now but, if he will allow it, I will write to him and to the Committee.
Energy Bill
Debate between Lord Roper and Baroness Verma
Baroness Verma
My Lords, in moving Amendment 51A I will also speak to Amendment 57; I hope that noble Lords will welcome them. The issue of increasing the scale of the feed-in tariff scheme was debated in Committee and on Report in the other place. It has also been raised by a number of noble Lords, both at Second Reading and outside the Chamber, including my noble friends Lady Maddock, Lord Teverson and Lord Stephen, as well as the noble Baroness, Lady Worthington, the noble Lords, Lord Whitty and Lord Cameron, and the right reverend Prelate the Bishop of London.
Having carefully considered the options, the Government agree that there would be a benefit to a limited extension of the feed-in tariff scheme. We intend to limit this support to community energy projects only. For developers of commercial projects larger than 5 megawatts, we continue to believe that larger projects are best supported through market-based incentives such as the renewables obligation and, shortly, contracts for difference as part of the electricity market reform process. This approach also offers the best value for money to the taxpayer.
Since the start of the FITs scheme three years ago, many communities have installed solar panels, wind turbines or hydro schemes. However, until now, they have been limited to a maximum capacity of 5 megawatts. We have listened to the compelling arguments of Co-operatives UK and others, and are convinced that the certainty of the feed-in tariffs scheme is a more appropriate way of helping community groups to deliver locally generated energy at scale and at the heart of their communities. We want to see communities up and down the country raising their ambition, and consider community-owned wind and solar schemes the most likely to benefit from this change. We hope that these amendments pave the way to support this greater ambition for community energy.
Amendment 57 is a procedural requirement which explains when this enabling power to amend the feed-in tariff scheme should come into effect. We will consult on how we intend to enable this change in secondary legalisation following Royal Assent. The current FITs scheme includes a definition of “community” which will form the basis of our consultation. We know that many will want to apply for this new support. However, we want to ensure that only genuine community energy schemes are permitted to benefit, so it is important that we create robust legislation which provides confidence to the public that subsidies are being delivered only to the intended recipients.
Taken together, these two amendments will drive a step change in the deployment of community energy. I hope your Lordships will support these amendments. I beg to move.
Lord Roper
My Lords, can I be the first to welcome the amendment? Those of us who have read the debates that took place in the other place in Committee and on Report are certainly very pleased that the move to assist communities to produce 10 rather than 5 megawatts has been agreed to. It will, however, be rather important that we watch carefully the secondary legislation which will define what is a “community activity”. Quite clearly, if it were to move into the commercial area, the increase to 10 megawatts would be resented by those who generate a little more than 10 megawatts. As it has been defined by the Minister today, however, it is an important step forward and will help a lot of micro-microgeneration in communities.
Energy Bill
Debate between Lord Roper and Baroness Verma(11 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Grantchester
My Lords, Amendment 50G would require the Secretary of State to present proposals to Parliament before making any changes to the terms of licence conditions under powers in Clause 127. However, while the Secretary of State is obliged to consult suppliers and Ofgem as well as any other person he thinks relevant, he is not obliged to present the proposals to Parliament for scrutiny. The Delegated Powers and Regulatory Reform Committee questioned the appropriateness of this in its report on the Bill, and drew attention to Clause 127(10). It stated:
“As is candidly acknowledged in paragraph 358 of the memorandum, the distinction between discretionary and principal terms ‘is central to the function of the clause’. It therefore seems to us surprising that the order-making power is subject to no Parliamentary control, and that paragraph 358 -while explaining why full definitions could not appropriately be included in the Bill - does not explain why there is no provision for Parliamentary scrutiny”.
Why do the Government deem it necessary to consult the industry and Ofgem but not Parliament or consumers?
Throughout the Committee’s scrutiny of the Bill, several noble Lords have highlighted the extensive enabling powers given to the Secretary of State. This fifth report of the Delegated Powers and Regulatory Reform Committee is also highly critical, rather uniquely for that committee, in stating that there is little provision in many chapters in the Bill,
“that does not involve the delegation of legislative powers”.
We offer our support to this amendment in order to ensure that any such order is given appropriate scrutiny by Parliament by the negative resolution procedure, as recommended by your Lordships’ Delegated Powers and Regulatory Reform Committee.
Baroness Verma
My Lords, I am extremely grateful to my noble friend Lord Roper for raising the issue in Amendment 50G that would make the use of powers set out in this clause subject to annulment resulting from a resolution of either House. Noble Lords will be aware that the Delegated Powers and Regulatory Reform Committee has recommended that the power of modification conferred by Clause 127(1) and the order-making powers in Clause 127(10) should require the draft negative procedure. We are looking at these recommendations, along with the others made by the committee, and will respond to it in due course. I therefore hope that my noble friend will withdraw the amendment.
Lord Roper
My Lords, I am grateful to the Minister for that reply. We await with interest the full response from the department to the Delegated Powers and Regulatory Reform Committee. I understand that it has already received a substantial response from the department that it will consider at its meeting tomorrow, and that it is possible that when we meet on Thursday we will have the results of its report and the department’s response, which will perhaps be of value to us. I shall withdraw the amendment at this stage, but if we do not have a satisfactory response on Report then it will be necessary to return to it. I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Roper and Baroness Verma
Baroness Verma
My Lords, I am extremely grateful to the noble Lord, Lord Whitty, for allowing me an opportunity to clarify some of the points he has just raised. Amendment 38R, when read with Amendment 38Q, as the noble Lord rightly said, seeks to limit the indicative list in Schedule 6 so that it can make reference only to nuclear regulations, including provision to restrict employment on the basis of qualifications or experience. The reason that broader provision has been included in the Schedule is that nuclear regulations may need to specify situations where individuals cannot do certain jobs—for example, pregnant women working at greater risk from ionising radiations, or restrictions on employment for certain types of person for security-critical posts. While Schedule 6 is only an indicative list, it would be a retrograde step to remove the examples in paragraphs 10(a) and (b).
Amendment 38V in the name of the noble Lord, Lord Whitty, seeks to remove the explicit provision in the Bill stating that the ONR is not a Crown body and that its property is not property of the Crown. The decision to include specific provision in the Bill to establish the ONR as a body outside the Crown was not made lightly. It is, however, integral to the policy of creating a more independent, flexible and efficient regulator. Most notably, the position of the ONR outside the Crown enables its staff not to be classified as civil servants. Recruiting and retaining skilled specialists is crucial for the ongoing effectiveness of ONR and Civil Service restrictions on pay and recruitment pose a serious risk to this.
Clause 76 includes a power for ONR to provide training which relates to its purposes. For example, if new regulations were brought in, it might be appropriate for ONR to provide training to duty holders on new requirements. Alternatively, if ONR has access to certain safety or security expertise of limited supply on the open market, it might be appropriate to make best use of this by offering training to up-skill the regulated community. Amendment 40H seeks to make this power a duty. While the provision of training by the ONR might be a useful and effective tool to promote safety or security, it is not a core function of the ONR. By making this a duty, it could divert valuable resource away from its core regulatory functions. Amendment 40J seeks to ensure that the ONR carries out only appropriate and relevant training. The ONR’s power to provide training is already limited to its purposes; therefore, I am confident that the Bill already focuses sufficiently on the ONR’s role in this area.
Finally, Amendment 40P seeks to protect ONR staff’s continuous service should they move in and out of the Civil Service. I reassure the noble Lord that pension rights of ONR staff will be preserved under existing provisions in the Bill, and I refer him to paragraph 15 of Schedule 7. As for preserving their seniority, I am reliably informed that civil servants are appointed on their skills and experience and that an official record of their continuous service is not retained for this purpose.
I hope that the noble Lord has found my explanation helpful and will accordingly agree to withdraw his amendments.
Lord Roper
My Lords, could the Minister give assurances that, on the references in Clauses 68, 80 and 104, the reports of the Delegated Powers and Regulatory Reform Committee will be looked at very carefully by the department and that she will be able to give us some assurance fairly soon? Otherwise, those are matters to which we will want to come back on Report.
Baroness Verma
My Lords, as I said earlier, of course, I am doing my level best to ensure that the Committee gets the information. We are considering very carefully what the committee laid out.