Electricity and Gas (Energy Companies Obligation) (Amendment) (No. 2) Order 2014
Debate between Lord Whitty and Baroness Verma
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I am pleased to open this debate on the two draft orders before us. We are proposing amendments to the existing ECO order which covers the period to March 2015, and a new ECO order which introduces a new period for the scheme, extending the obligation to March 2017.
The Government have faced up to the enormous energy challenges our country faces over the coming years. With the overhaul of the electricity market and record investment in renewable technologies, we are well on the way to making sure that the UK’s energy is secure, low carbon and affordable, and improving the energy efficiency of the UK’s homes is central to this challenge. Through the Energy Company Obligation scheme and the Green Deal, we are making homes warmer, more energy efficient and cheaper to heat. Since the introduction of ECO and the Green Deal framework we have made tremendous progress towards our target of 1 million homes making one or more permanent energy efficiency improvements by March 2015.
Altogether, around 995,000 energy efficiency measures had been installed in more than 819,000 homes by the end of September. The vast majority of households benefiting have received support from ECO, with more than 585,000 measures going towards around 482,000 low income and vulnerable households, and households in deprived areas. Under the Affordable Warmth scheme, we had delivered just under 380,000 measures into around 304,000 households by the end of September. This work has delivered £4.2 billion-worth of notional lifetime bill savings and is a significant investment in addressing fuel poverty. Thanks to the new ECO order we are introducing today, more than 400,000 further insulation measures and around 250,000 more heating measures are due to be delivered through ECO by 2017. This will provide long-term certainty for the industry and enable it to deliver as effectively as possible.
I recognise that the changes we are making to the existing ECO order are significant. Nevertheless, the policy will continue to drive large-scale investment in energy efficiency across the country. Going forward, it will be targeted more at those who need it most: those who are, or are at risk of, becoming fuel poor. These changes were proposed in December 2013 as part of a package of measures introduced by the Government to reduce energy bills by an average of £50. The changes to ECO alone will reduce energy bills by around £35, which energy companies have confirmed they are on track to deliver.
The vast majority of customers pay for the ECO as part of their energy bills. We all know that energy bills have been rising in recent years, which is why it is right and fair to review the impact that this policy has had on household costs. We are continually monitoring the scheme to make sure that we strike the right balance between the long-term benefits of energy efficiency and the more immediate impacts on consumer bills. This is so that we can continue to offer help to those in need while ensuring a sustainable scheme that delivers value for money for everyone else.
I am proud to say that, thanks to the impact of government energy policies, household energy bills are on average £90 lower this year than they would have been otherwise, as the costs of supporting home-grown, low-carbon energy sources are, on average, more than offset by savings from the Government’s energy efficiency policies. An average household dual fuel bill in 2014 costs £1,369, compared to a projected £1,459 if Government policies, including ECO, did not exist to support cleaner energy, to ensure security of supply this winter, to help vulnerable households and to promote energy efficiency.
To reduce the cost of delivering ECO, the amendment order will reduce the 2015 target for the carbon emissions reduction obligation by 33%. These orders extend the eligible primary measures for the carbon emissions reduction obligation to include loft insulation, cavity wall insulation and district heating systems where these measures are installed from 1 April 2014 onwards. We recognise that some energy companies will have delivered more than others and will have done so by investing in more expensive measures. Therefore, we intend to provide a carbon uplift for those companies to ensure that they are not penalised for acting early. However, alongside some scaling back intended to lower overall costs, we are also introducing a minimum target for solid wall insulation, which will guarantee for the first time that a substantial number of solid walled properties—around 100,000—will be treated under ECO to March 2017. We have done this to ensure that we continue to support people living in cold, hard-to-treat homes, as well as to deliver carbon savings.
In addition to this, we allocated an additional £450 million in support of household energy efficiency over three years. As part of this, we have provided further support for energy efficiency measures, including solid wall insulation, through the Green Deal home improvement fund. The success of the Green Deal home improvement fund demonstrates that consumers will take up energy-saving technologies where costs and disruption have previously resulted in low take-up rates if incentives are sufficiently attractive. I am pleased that the Government will soon announce a second release of the Green Deal home improvement fund as part of making a further £100 million available to household energy efficiency.
Furthermore, our changes to ECO do not involve any reduction in the level of support for low-income and vulnerable households. As noble Lords will know, the Government are putting in place a new energy efficiency-based fuel poverty target for England. Parliament is currently considering the proposed legislation. Extending support under the ECO Affordable Warmth scheme ensures continued long-term investment in energy efficiency in fuel-poor homes. It is considered the most sustainable way of tackling fuel poverty and reducing the cost of keeping warm. Reflecting that reducing fuel poverty is a priority, the orders we are considering retain dedicated Affordable Warmth activity under ECO at the original level of investment. Thanks to our new order, we are giving certainty to industry by extending activity on the same scale to March 2017.
We have also sought to make ECO easier and cheaper to deliver in low-income communities and rural areas. We are therefore extending the carbon-saving community obligation part of ECO to cover the bottom 25% of areas on the index of multiple deprivation, meaning more households in low-income areas have access to ECO funding, and we are simplifying the eligibility requirements for installing measures in rural areas. These changes will apply for measures installed since 1 April 2014 and have already resulted in a significant increase in the number of measures delivered to hard-to-reach rural homes.
The new order extends the ECO scheme to 2017, with new carbon and Affordable Warmth targets to be met over the period April 2015 to March 2017. This will ensure that ECO continues to deliver energy-efficiency measures in households for an additional two years. It will give certainty to industry and, together with the impacts of the amending order, we expect it to result in interventions for an additional 620,000 households.
The order makes some adjustments to the ECO Affordable Warmth scheme. We are rebalancing delivery towards non-gas fuelled households, which are more likely to be in fuel poverty, by introducing an uplift to be applied to insulation and qualifying boilers in non-gas fuelled households; and bringing in a new eligibility measure—a qualifying electric storage heater—which will incentivise delivery to electrically heated homes by giving these measures a different score than they would previously have received. This will now be calculated in a similar way to the score for a qualifying boiler.
ECO has delivered 267,000 new boilers in low-income and vulnerable households. This is a significant achievement. For the future, we are incentivising a more balanced profile of delivery, by setting the score for measures in such a way that will mean insulation measures will be more likely to be promoted than they were previously. We are also introducing additional customer protections by requiring that a warranty covering the installation of new boilers is provided free of charge to the customer.
In conclusion, the amendments to the current ECO order will bring much needed reductions to energy bills at a time of rising energy costs, while protecting energy-efficiency funding for vulnerable and low-income households. I commend these orders to the Committee.
Lord Whitty (Lab)
My Lords, I thank the Minister for explaining these extremely complex changes, and for doing so despite a short-term disability in terms of delivery. It is probably sensible that she indicates that she will write to me on any points she wishes to take up because we have another set of regulations to get through before we finish on energy today.
I also thank the Minister’s officials because they have produced Explanatory Notes and an impact assessment that are extremely complex. However, some of that raises rather more questions than it answers. The Minister has done her best to present this as an advance in tackling energy efficiency but my assessment is that in some ways it is a retreat. It is obviously part of the broader approach of government to the multifarious challenges of energy policy but most commentators would say that the energy-efficiency dimension of it is faltering.
Let us look at a bit of history. When they came in, the Government inherited a number of different schemes from the previous Government: Warm Front, CERT and CESP in England and the equivalent taxpayer-funded Warm Front schemes in Scotland, Wales and Northern Ireland, which are still running. None of those schemes was perfect, although when I was a Minister Warm Front actually delivered 250,000 interventions per annum, which is considerably more ambitious than the aggregate of all the schemes to which the Minister referred.
The intention of the Government was that the ECO, funded by consumers rather than taxpayers, would replace all those schemes in one way or another, at less cost. It would be more consolidated, more stable and more geared to the physical and social challenges implicit in dealing with energy efficiency and fuel poverty. It has fallen well short of that so far. Some minor improvements have been made and are being made today in terms of the coverage, techniques and technologies for which ECO can pay—but on balance it is going backwards. That is partly because the Government’s very good first intention when they introduced the concept of the ECO was that this framework would last for 10 years. It was said that it would run to 2023 in broadly these terms. However, after two years we have some pretty major changes and some significant underperformance.
Infrastructure Bill [HL]
Debate between Lord Whitty and Baroness Verma(10 years, 1 month ago)
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Baroness Verma
My Lords, I hoped that I had reassured noble Lords that we do not wish to see the taxpayer foot the bill or any bill, and that there will be processes in place to ensure that that is the case. Having gone through the amendment of the noble Lord, Lord Whitty, and his concerns, I hope that he will see fit to withdraw it.
Lord Whitty
My Lords, I am very grateful to the noble Baroness for her full reply and for the matters that the noble Lord, Lord Jenkin, drew to our attention. It has always been clear to me that the Government and the regulatory authorities have the powers to require remediation. The issue I was attempting to cover was if sufficient funds were not available to do that. The Minister said that the authorities, in granting a licence, have the ability to say, “You have to provide some money upfront”. There was also reference to a mutual industry scheme. It seems to me prudent for the Government to make that a condition of the licence—either that a fund is established or that the relevant body is a member of the scheme being established by the industry. Otherwise, we will end up with a situation whereby, as a result of an unforeseen accident combined with financial problems for the company, or, as a result of a situation whereby, many years hence, there is an abandoned site, orphan site or a site that has been badly decommissioned, there is damage but there are no funds available to cover it, so at the end of the day the taxpayer will pay for that.
I accept a lot of what the Minister and the noble Lord, Lord Jenkin, said but unless this is a condition of a licence, either through insurance or by establishing a fund, we will not have the situation entirely covered, and that is not entirely reassuring to those who are worried about the potential impact of that on their environment, business or dwellings. The Minister has gone some considerable way on this issue and I will certainly not press the amendment any further tonight, but her reply was not quite as reassuring as I had hoped. Nevertheless, I thank her and others who have contributed to this debate. I beg leave to withdraw the amendment.
Infrastructure Bill [HL]
Debate between Lord Whitty and Baroness Verma(10 years, 2 months ago)
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Lord Whitty
My Lords, I want to underline one point under Amendment 95ZBN, which will be tedious because it was raised during the course of the passage of the Water Bill, on the role of water companies. I understand the exasperation of my noble friend Lord Young and the noble Lord, Lord Borwick, who referred in similar terms earlier to scares being raised about shale gas, and their not necessarily being very scientifically based. However, I do not think that Thames Water or Severn Trent Water fall into the category of scaremongering green organisations. They really ought to be brought into this process, because the biggest anxiety is about the effects on the water system and giving the water companies a statutory consultee role would help to reassure a number of people about the effect of fracking operations on the water supply. I therefore hope that proposed new subsection (3) in that amendment is adopted by the Government.
Baroness Verma
My Lords, again, I am extremely grateful for the measured way in which this debate is taking place and for the very eloquent way in which noble Lords have presented their arguments, whether supporting what the Government are doing or raising amendments to show concerns. I welcome the spirit behind the amendments, which are aimed at ensuring that environmental safety is fully protected throughout the shale gas extraction process and reassuring the public that that is the case. My noble friend Lord Borwick said that to enable trust we need to ensure that the regulators are presenting a trustworthy way in which to approach the regulatory system.
We have among the most trusted regulators in the world. The commitments the regulators—the Environment Agency and so forth—have undertaken has allowed the debate to become much more measured.
Renewables Obligation Closure Order 2014
Debate between Lord Whitty and Baroness Verma
Baroness Verma
My Lords, I thank my noble friend for his intervention. We have consulted with all devolved Administrations.
Lord Whitty (Lab)
I have two points on which the noble Baroness may wish to write to me. I mentioned in the previous debate the apparent intention of the department to end ROs on larger solar projects over 5 megawatts from April next year, which is well before anything else happens. I wonder whether the department are proceeding with that—it is a uniquely early finish of RO cover—for projects which may come on, or be in the process of coming on, in the period between now and 2017.
Secondly—I may have to declare a past interest—there is an obscure footnote to this which relates to the need to consult the National Consumer Council, of which I was formerly chair. The National Consumer Council was abolished but its powers and interest in the energy dimension have transferred to Citizens Advice. I hope that the department can give a general assurance that Citizens Advice will be consulted in the same way as Consumer Focus, and before that Energywatch, was consulted on all matters of energy policy which relate to consumer outcomes.
Baroness Worthington (Lab)
My Lords, I am sad to see the end of the renewables obligation. It is tempting to say that everything was dysfunctional, that nothing was working and was not it awful. However, we should look at what we have achieved: at how much renewables capacity we now have in the UK and at how quickly and efficiently it has been deployed. This was largely achieved because of the RO, which replaced the NFFO scheme.
It was a highly innovative scheme which was introduced to allow the market to choose the projects it thought it should bring forward. It was obliged, of course, to meet targets set by Government but, by and large, it chose what to do. There were merits in that because it created an obligation. As we know, faced with having to do something or not do something, most people would choose the latter, stick with what they know and remain encumbered with technology that they understand and assets that they can continue to sweat. One of the benefits of the RO was that it did not allow that to happen. The ways in which penalties were repaid back to your competitors encouraged you to build new bits of kit, and to do so under a market-driven system. Over time, of course, it changed to ensure that we were not paying too much and that consumers were getting a good deal.
Over the years that we have been debating EMR, I can remember someone saying to me—I do not know whether or not it is true—that when EDF first approached government and said, “We want to build a new nuclear power station”, its first suggestion was, “Simply give us a ROC band. We can do it. We can build you Hinkley if you turn it into a low-carbon obligation and allow nuclear to be eligible”. Would it not have been a lot simpler if we had just said “Yes”? We did not, but we have come up with a new system, and we are where we are. However, I want to put on record that RO was successful; it brought forward a lot of capacity and brought diverse players into the market. We saw a great diversification of the number of companies that took part in the electricity market because of the RO. I, for one, am slightly nervous that we are abandoning what was a functioning system and embarking on a new, glorious path. I hope that the CFD will be as successful.
However, one suggestion is that it would be good for the department—perhaps this talks to my noble friend Lord Whitty’s point about communicating with the public in ways that it understands—if we could have an assessment of the RO, how much capacity was brought on, the diversity of that capacity and of the investors in that capacity. That would give us a good baseline from which to measure the success of the CFDs. We want CFDs to be more successful—we want them to bring on more capacity from a more diverse range of participants. Therefore, although it is not strictly speaking part of this regulation, and nothing in there requires it, it would be good for the department to undertake to provide us with a summary and a review of the effectiveness of the RO. From there it could move on to use those parameters of diversity and deployment against the CFDs, so that we can measure how successful they are.
My noble friend Lord Whitty raised an important point, that once the RO closes and the CFDs move on, there is a danger that we have mid-range technologies which fall into a sort of valley of death between FITs and the new CFD arrangements. I echo his question. We want to clarify that we will not see technologies that are currently receiving support either through FITs or the RO being lost in translation towards the CFDs. However, other than that, I thank the noble Baroness for her presentation.
Baroness Verma
My Lords, I am extremely grateful to all noble Lords for their contributions. This has been a very short but interesting debate. I will respond very quickly to one or two of the points that were raised. Again, if I do not respond fully, I undertake to read Hansard carefully and to respond in writing.
The noble Lord, Lord Whitty, asked whether Citizens Advice would be consulted on the use of powers relating to the RO; the answer is yes. He also asked about financial support for solar PV. We have consulted on the proposals to close RO across Great Britain to new solar PV capacity above 5 megawatts from 1 April 2015. Those proposals will apply to both new installations and to additional capacity added to existing ones. From the noble Lord’s expression, I am not sure whether that was the answer he expected.
Lord Whitty
My Lords, I appreciate that the Government have consulted. Is there a final outcome to that consultation? If it is in line with the original propositions, I will be worried.
Baroness Verma
My Lords, the only response I can give is the one I gave just now. However, if that is not useful, as I said, I will go back and read Hansard to see whether my answer can be tweaked to be a little better —although I think the answer will possibly be the same.
The noble Baroness, Lady Worthington, asked about the success of RO and asked for us to provide some detail of its success over the period it has been in place. Yes, it would be wrong to try to produce it now, so it may be useful to write to the Committee to allow it to look at it in fuller detail. However, I hope that the noble Baroness did not misunderstand me. In our earlier debate, I referred to the RO as being a useful tool to bring on the renewables that we so rightly need to reduce our carbon footprint, but also to ensure that we have a proper mix of energy sources. However, in future the CFDs provide a better mechanism for the longer-term necessity for investment confidence.
I know that the noble Baroness, like other noble Lords, is very supportive of a much more self-sufficient renewable sector in the country, particularly given what is happening across the globe. The CFD scheme provides longer-term certainty and better returns for investment, but also gives us an opportunity to try to bring the costs down so that the impact is much more beneficial to the consumer.
The order raises two important changes introduced to the RO scheme. The first sets a consistent closure date across Great Britain to new generating capacity, at which point CFDs will become the main support mechanism for large-scale, low-carbon electricity generation. The second introduces grace periods designed to target specific risks of delay with the intention of avoiding any investment hiatus. Both measures will ensure that investors continue to have confidence in the operation of the RO in its final years as we transition to a new support regime.
I thank all noble Lords for their contributions.
Pensions: Low-carbon Investments
Debate between Lord Whitty and Baroness Verma(10 years, 9 months ago)
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Lord Whitty
The Chancellor said he was bringing together the large pension funds to look at their investment in infrastructure.
Baroness Verma
My Lords, I am told that I have two minutes. We have made progress. A £500 million fund to be managed by Dalmore Capital will, hopefully, be unveiled and be available. I think that is the fund the noble Lord is referring to, but I will read Hansard and make sure.
The noble Lord, Lord Whitty, also mentioned the carbon floor price. We have to establish a price that sends a credible signal to help drive billions of pounds of investment in low carbon energy generation. However, we also have to put it against what is happening with our partners and member states. We cannot let our industries be at a disadvantage because we have not been able to reduce the burdens on our energy-intensive industries.
I have been told that I need to sit down very soon, but I would like quickly to touch on the reference made to the Green Deal by the noble Lord, Lord Grantchester. I remind the noble Lord, over and over again, that this is a very long-term programme. We did not come in singing it with bells and drums, but it has seen significant measures being put in place. We have seen over 500,000 measures installed under ECO. The noble Lord must be aware that some may have used the Green Deal bank but others may have their own finance.
Energy: Action on Bills
Debate between Lord Whitty and Baroness Verma
Baroness Verma
My noble friend is right. We need investment. Since 2010, we have seen more than £35 billion of investment in the energy sector in this country. My noble friend will have to get the answer on the Opposition’s pledge from them. It seems that they are empty words that have no substance.
Lord Whitty (Lab)
My Lords, perhaps the Minister can clarify the arithmetic, particularly in relation to the eco. Past DECC figures suggested that the eco costs consumers about £47 a year. This Statement claims that we will save £30 to £35 of that cost, yet 60% of the eco relates to affordable warmth and other fuel poverty measures, and they are going to be maintained according to this Statement, so the full cost must fall on the other 40%. By my calculations, that works out at roughly £7, not £30 to £35. The only way to square those figures is by extending the period by another two years, which means halving the annual expenditure on the fuel poverty programme. Even then, the arithmetic does not work out. If that is indeed the case, and the insulation industry seems to be taking that to be the case, does it not justify the stance that we on this side of the House took that the Government’s commitment to the fuel poverty strategy is only to address it rather than to reduce the numbers in fuel poverty? The only measure that we have yet seen is an attempt by the Government to refine fuel poverty downwards, as the Select Committee in the other place pointed out. Will the Minister explain those figures and perhaps justify the position?
Energy Bill
Debate between Lord Whitty and Baroness Verma
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendment. Rightly, he has again highlighted the seriousness of fuel poverty, as he has throughout the debates on this Bill, and I know that on all sides of the House there is a real determination to ensure that the interests of the fuel poor are represented properly. Indeed, earlier today I attended an event with fuel poverty experts to gain a better understanding of how to tackle the problem, at the invitation of the noble Lord, Lord Whitty, for which I am extremely grateful.
The Government are determined to act to ensure that consumers get a good deal and affordable energy bills. Indeed, our analysis suggests that as a result of the electricity market reform measures in this Bill, household electricity bills will be, on average, around 9% lower per year over the period 2016 to 2030 relative to what they would be if decarbonisation were achieved through existing policy instruments. As such, the impact of EMR will be to reduce fuel poverty compared to what it would have been without these policies in place.
The noble Lord’s amendments would set an objective to reduce the number of persons living in fuel poverty and improve the energy efficiency of their dwellings. The Government are intent on tackling fuel poverty at its heart, with improving energy efficiency for fuel-poor households a real priority. We agree that improving the energy efficiency of fuel-poor homes can make a sustained improvement to the situation of households struggling to keep warm and it is therefore the right type of target to aim for. However, the right balance must be struck between what is set out in primary legislation and what is subsequently laid out in regulations, in order to maintain an appropriate use of parliamentary time and the level of government accountability.
Therefore, we have proposed setting out the detail of this objective through secondary legislation because we believe that this strikes the right balance between the certainty of a legislative target and the need for flexibility in the future. We know from Professor Hills’s independent review that the way in which we understand the problem can change over time, as well as the best ways of tackling it. Primary legislation is not the appropriate vehicle to set out the detail of the target, given the importance of a nuanced, flexible approach to tackling fuel poverty.
The issue with the current legislation is that there is a very specific target which does not make sense in the context of how we have come to understand the problem of fuel poverty. That is why we have framed the new provisions in the way that we have, to ensure that there is an objective to address fuel poverty but with the detail of that objective set out in secondary legislation. Our proposals ensure that the setting of the target, and any changes to it, will be subject to full parliamentary debate, and the importance of that debate is why we have suggested from the outset that these provisions will be subject to affirmative resolution by both Houses.
Furthermore, from a practical perspective, it would not be sensible to make specific reference to improving the energy efficiency of dwellings, as this could mean that every time the methodology for measuring energy efficiency is updated, the primary legislation would need amending. As this could occur every couple of years, it would not represent a proportionate use of parliamentary time for what would be very technical amendments.
To reflect on what the noble Lord, Lord Whitty, said about the measures we are currently using under ECO, thus far 311,250 energy-efficiency measures have been installed in around 273,000 properties through ECO and the Green Deal, to the end of September. The vast majority have been installed through ECO so we believe that ECO is working. It is reaching out to the very families that I know the noble Lord and I both believe need the greatest assistance.
In summary, I agree with the spirit of the noble Lord’s amendments but do not believe that it would be sensible to put this detail in the primary legislation However, since we are agreed on the intention, I hope that my response has reassured the noble Lord and he will withdraw his amendment.
This is the last group to which I will speak, so before I sit down I would like to put on record my thanks to everyone who has played a role in the passage of the Energy Bill through this House. I start by thanking the Lord Speaker and all Deputy Speakers and Deputy Chairmen who have facilitated our proceedings. I also thank all those who have worked behind the scenes: the clerks, Hansard, the doorkeepers and the officials from the Ministry of Defence, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs who have supported the Government. I add my particular thanks to my officials from DECC, who have worked tirelessly—even to the point of giving up annual leave during the Summer Recess—to be able to provide the information that your Lordships required, which was made possible by the way they performed so heroically during the passage of this Bill.
I also thank all noble Lords who have taken part in our debates for their constructive contributions to the Bill. We have scrutinised it in full and I have no doubt it is leaving us in a better state than it arrived in, thanks to the expertise of this House. We have added new provisions on fuel poverty, access to markets and enabling the level of the small-scale feed-in tariffs threshold to be raised. Thanks to my noble friend Lord Roper and the Delegated Powers and Regulatory Reform Committee, we have also improved the level of scrutiny afforded to the delegated powers in the Bill.
I particularly thank my noble friend Lord Gardiner, who has so ably assisted me at the Dispatch Box, as well as my noble friends Lord Courtown and Lord Teverson, who have assisted from the government Benches.
I am also extremely grateful to all members of the House of Lords informal scrutiny group on the Energy Bill, which first convened for pre-legislative scrutiny and has continued its most helpful and appropriately challenging scrutiny in parallel to the Bill’s passage. I particularly thank the noble Lord, Lord Oxburgh, who I do not see in his place, for his long-standing chairmanship of this group.
We have not agreed on everything but I am grateful for the broad support there has been for the intentions of this Bill. As I am sure noble Lords will agree, it is now important that the Bill proceeds to Royal Assent as swiftly as possible in order to secure the investment that is vital for growth, jobs and the decarbonisation of our economy.
Lord Whitty
My Lords, I echo the noble Baroness’s sentiments in relation to the passage of this Bill. Although, apart from the Minister herself, we are now discouraged from making lengthy speeches at Third Reading, I would like to underline her thanks to her staff, because they have been extraordinarily helpful to other Members of this House. The meetings we have had under the auspices of the noble Lord, Lord Oxburgh, and the noble Baroness have been extremely helpful.
As the noble Baroness says, we have not always agreed. We do not entirely agree on this clause. Some of what she addressed in her reply related to earlier discussions we had on Report. I am not trying to specify targets in any detail; I am saying simply that the fuel poverty strategy should be about reducing the number of fuel poor, including by improving the energy efficiency of their homes. I would have thought that was pretty incontestable and really should have been reflected in this Bill.
I will not pursue this tonight but I will just say to the noble Baroness that because of when this was introduced, the other place has not actually considered the fuel poverty dimensions of this Bill. I rather suspect that her colleagues in the House of Commons will have some lengthy discussions on this and, in the light of that prospect, I will withdraw my amendment tonight. I reiterate my thanks to the Minister and her staff for the conduct of the whole passage of this Bill.
Energy Bill
Debate between Lord Whitty and Baroness Verma(11 years, 1 month ago)
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Lord Whitty (Lab)
My Lords, this amendment relates to the redress element of Part 6. I approve of the increase in protection for consumers in the redress provisions in the Bill and have supported them throughout. However, there is a dimension that is not there, and there is one that has been discussed with successive Governments but has never been fully put into operation. The present Government, in their consultation through BIS on consumer rights and protection in general, mentioned the possibility of moving to a system of collective redress.
In the energy situation, the whole structure of the market and the whole history of the scandals in relation to consumers underline the need to have some collective resolution of these matters. If you look, company by company, at most of the mis-selling and misrepresentation, the overcharging, the failure in billing and the wrong billing, right up until the very recent case where Ofgem fined ScottishPower, you will see that thousands, and in some cases tens of thousands, of consumers have effectively suffered from exactly the same mistake-cum-misdemeanour by the relevant energy companies.
At the moment, complaints against energy companies are running at an all-time high—you have only to look at the ombudsman’s figures and facts. The need for redress systems is very important, but if every individual consumer has to take that case either through the ombudsman or through the courts, the ombudsman’s agenda is going to get cluttered up and the courts are going to lead to individual decisions, which may be different in different parts of the country. A form of collective redress for everybody who has suffered from what the regulator will have found to be a mistake, or an error, or a breach of the licence or other regulations, affecting tens of thousands of consumers, needs to be treated in a somewhat different way.
I am not stipulating here precisely what way. There have been a number of formulations for collective redress in different sectors. The best of these was never put into legislation, but was dropped during the wash-up at the end of the last Parliament, because the Treasury was proposing very effective collective redress systems within the financial services sector.
The Government, in their draft Consumer Rights Bill, which is now being considered in pre-legislative procedures, have not followed up on what was in their consultation paper, which had a different formulation. In relation to gas and electricity, the degree to which there are large numbers of people suffering from the same act of a company, the fact that there are licence conditions attached to that and the fact that there is a whole structure of regulatory ombudsmen in that area, make it a relatively easy sector, in principle, for which to produce a system of collective redress.
My amendment requires the Secretary of State to come forward with regulations to that effect within six months of the passage of this Bill, so I am leaving the Minister and her colleagues a bit of time to do this, but I think the principle will be recognised. This would be pretty much well supported by, I think, all the consumer groups and many of those who have dealt with individual cases of consumer detriment which have arisen within this sector. I hope that the Government will consider this and, at least, give me some encouragement, if not tonight then in the future, that they will be looking in this direction. The way in which this industry has treated its consumers; the degree of mistrust among them and the level of redress that individual consumers have achieved in this sector show the need for something more systematic. I hope that the Minister and her colleagues will use this amendment to have another look at the issue. I beg to move.
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con)
My Lords, I thank the noble Lord, Lord Whitty, for this amendment. Amendment 104B would require the Secretary of State to consult on and then bring forward regulations to allow collective redress for energy consumers. I agree with the noble Lord that consumers need to get the redress that they are due by the most straightforward means available. I fear, however, that the introduction of collective redress in the energy sector would not achieve these aims. My concerns centre mainly on the time and cost of bringing such cases.
The noble Lord has said previously that collective redress offered a quicker and cheaper solution for cases than if cases were pursued by individuals either through the ombudsman, Ofgem or the courts. This presupposes that action through the courts is the only option available where an issue affects more than one consumer. That is not the case. One of the reasons we have introduced the consumer redress order powers in this Bill is to provide consumers with the means of redress without the need to initiate individual complaints.
Baroness Verma
My Lords, I would like to thank the noble Lord, Lord Whitty, for his amendment. It sets out the issues that must be contained within the strategy that will set out how we are going to meet the target. As I mentioned earlier, we will publish the strategy for consultation next year and intend to use this opportunity to set out our plans for how we will tackle fuel poverty. I agree with noble Lords that there are clear links between fuel poverty and health, and a clear health benefit to the NHS by acting in this area. That is why we already include excess winter death rates as part of the annual statistics we publish on fuel poverty. We are working to better understand the costs and benefits to the NHS and we will be building on this within the strategy.
The proposed amendment also suggests that the strategy covers a number of other issues such as debt, the depth of fuel poverty and the number of children who are living in fuel-poor households. These are all very important concerns. It is for this reason that we already report widely within the annual fuel poverty statistics and these issues are included. In reference to the noble Lord’s query about the old and the new definitions, I confirm that we will continue to include fuel poverty numbers under the 10% definition. This is something to which we are already committed, and it will continue to appear in the annual fuel poverty statistics. I hope that the noble Lord, Lord Whitty, is reassured that the fuel poverty strategy will be a comprehensive one and that it is not necessary or appropriate to set out the issues that it will cover within the primary legislation. I trust that he will feel reassured enough to withdraw his amendment.
Lord Whitty
I am very grateful to the Minister. If she is saying that the method of reporting and the issues which we cover in those reports will continue, I certainly welcome that. On the issue of the measurement, I should say to the noble Lord, Lord Jenkin, and to the House that I do not think Professor Hills’s definition is necessarily a better one. I agree that there are defects in the old one but I think there are also defects in the new one. Professor Hills’s proposal of measuring the depth of fuel poverty as well as the absolute numbers of fuel poverty is a very useful tool and I strongly support it, but time will tell as to whether or not his definition is better than the old one.
I am gratified that the Minister is saying that the series will be continued, at least for some time. By implication she may have meant for longer than is provided for in this amendment. That will give continuity and time for the new series to build up because the new definition will start from next year. We will not have much of a series for very long. That will greatly help those who have campaigned long on the basis of the 10% definition to understand how the policies are impacting that, and to see whether or not the new definition is robust. I am reasonably assured by the Minister, rather more than I expected to be, and so I beg leave to withdraw the amendment.
Baroness Verma
My Lords, I thank my noble friends Lord Teverson and Lord Roper for tabling this amendment and my other noble friends for their contributions, especially my noble and learned friend Lord Mackay of Clashfern, as he laid out very clearly the position of the law without referring to windmills or any other type of energy source. The judgment referring to planning consent under Section 36 of the Electricity Act 1989 can be made only when the applicant, at the time of making the application, holds a licence to generate electricity under the Act or holds an exemption from this requirement, as my noble friend Lord Teverson pointed out. This judgment is being appealed and we are monitoring the position carefully. Given that the appeal is under way it would be premature, and indeed inappropriate, at this stage to adopt a legislative amendment without knowing what the outcomes were. Any legislative change would need to be considered in the full light of the outcomes of this case and it would be a mistake to assume that the judgment of the Outer House, if upheld, would be decided upon in exactly the same terms in the Inner House.
If we legislate now, we may find that the amendment does not deal with the final interpretation of the legislation, taking into account the arguments that are being developed as part of the judicial review hearings. In the event that this decision is upheld in terms equivalent to the original opinion of the noble and learned Baroness, Lady Clark of Calton, we will of course work with the Scottish Government to review the situation. For those reasons, I ask my noble friend Lord Teverson to withdraw his amendment.
Energy Bill
Debate between Lord Whitty and Baroness Verma(11 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Whitty
I thank all noble Lords who have taken part in this debate. It proved to be rather more wide-ranging than I had anticipated, largely thanks to the first intervention by the noble Lord, Lord Howell. I agreed with some of it, but he provoked a debate we have already had several times in the course of the Bill. I disagree with his central point and I think we need to take advice from the noble Lord, Lord Deben. It serves nobody’s interest to trade off the interests of the fuel poor against the objectives of reducing carbon in our energy. We have to tackle both as far as we can: it is not a trade-off. Indeed, many of the measures we are talking about to help the fuel poor, in particular improving the energy efficiency of homes, also help to reduce total demand for energy and reduce carbon. There is no conflict: they are synergetic, if that is the word, in many respects. It was a bit of an unfortunate diversion, but at least it livened up the debate.
The noble Lord, Lord Jenkin, and the Minister, to some extent, accused me of a volte-face. Certainly when the Government—between proceedings in the Commons and the Lords—came up with Clause 136, there was a sigh of relief, which I shared, that fuel poverty was being addressed in this huge reorganisation of the electricity market and energy policy generally. I have no doubt that other noble Lords on this side shared the relief that fuel poverty was at least appearing in the Bill. The problem is that it appeared at a rather late stage and that, as I said and maintain, it is a rather thin clause. It refers to the Government “setting out an objective” at some date “for addressing” fuel poverty—it does not even say “reducing fuel poverty”. We therefore want a little more meat on the bone. Some of it can no doubt be done by secondary regulation, but it would be better, frankly, if the Government were open to strengthening Clause 136.
The issue immediately before us is slightly different. Amendments 92A and 92B suggest that we should clearly signal within the statement of energy policy that fuel poverty is one aspect. Indeed, the programme, the policy and the strategy that the Government intend to bring forward under Clause 136 should be seen as part of that. It needs specific mention because it was not there for most of the Bill’s existence, it does not appear in most of the Bill, it was not there at all for the whole of the Commons procedure on the Bill and it needs to be clear now. This is our last opportunity in consideration of the Bill to make sure that fuel poverty is a major dimension of overall energy policy.
That is a fairly simply thing for the Government to accept. I am sorry that the Minister thinks that it is superfluous or otiose, as it is very important. If the objective of fuel poverty is not in the minds of not only DECC Ministers but those who are concerned with social policy and health policy, those in the Treasury and those who determine the priorities of this Government when we come to energy policy, we are in some difficulty.
Baroness Verma
My Lords, I make it very clear to the noble Lord that the amendments that we have tabled give a clear timetable for bringing forward proposals for a new target and a strategy to achieve it. Therefore noble Lords can have great certainty that we will put in place a comprehensive framework within a fixed time of the Act coming into force.
Lord Whitty
My Lords, I accept the Government’s good faith—and certainly the Minister’s—in this respect. Certainly, Clause 136 gives the Government the opportunity and the requirement to do that. However, my point on these first two amendments is that we cannot ghettoise fuel poverty into one clause of the Bill and one aspect of government thinking. All approaches to tariffs, investment and the source of energy, as well as to measures to improve the energy efficiency of homes and other direct measures to help the fuel poor, need to be seen in the totality of energy policy as part of the Government’s obligation. That is why Amendment 98A proposes that a reference to fuel poverty should be written clearly into the policy statement. It is nothing more than that, but it is very important that that is reflected. I would have thought that the Government could have accepted it, but given that the Government are clearly not prepared to accept it I wish to test the opinion of the House.
Lord Whitty
Because it draws attention to the first four, which relate to other matters. It does not allow for the lumping together of tax costs and environmental charges, as some companies voluntarily do. Rather than end with a vague, catch-all phrase we should be balanced, we should look at the totality of costs and we should list them. I hope that the Minister will take away the spirit of this amendment and the wording of the first couple of sentences, and look at it in a rather wider context, perhaps coming back at Third Reading with a rejigged amendment. However, I cannot support the amendment of the noble Lord, Lord Forsyth.
Baroness Verma
My Lords, I thank my noble friend Lord Forsyth for moving the amendment on behalf of my noble friend Lord Marlesford and the right reverend Prelate the Bishop of Chester. I sympathise with the aims behind this amendment. Consumers have a right to know what they are paying for, particularly when it is a basic essential, such as energy. The Government recognise the importance of providing clear and consistent information about the content of bills. Every year my department publishes a breakdown of costs that make up an energy bill along with a detailed assessment of the impacts of our policies. We feel strongly that suppliers should be open and honest about the costs that they incur, and noble Lords will have heard my colleagues in the other place repeating this call in recent weeks.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Baroness Verma
I shall try to seduce the noble Lord better next time, but in the mean time I hope that the noble Lord, Lord Whitty, withdraws his amendment.
Lord Whitty
My Lords, I thank the Minister and everybody who has taken part in this debate, and I will answer some of their points. The noble Lord, Lord Jenkin, is clearly right that the trigger for setting up the ONR under a new statutory basis was to take it out of the Civil Service, and a large part of the reason behind that was the need to ensure that we have adequate expertise in this field. It is a field that has been allowed to run down; we are probably not without expertise at this point, but they are ageing. Some of them are tempted elsewhere and it is a global market, and therefore it was important for us to ensure that this happened.
Although that may have been the trigger, we have a wider prospect here of a largely comprehensive regulator having its duties set out in a fair amount of detail in this Bill. It would be wrong to say that it is entirely a reflection of the fact that we potentially face a scarcity of resources. Having said that, it is of course important, as the noble Lord, Lord Jenkin, and my noble friend Lord Judd have said, that we address that issue in terms of training provision, investment and our ability to compete for global talent. However, there are wider issues involved here as well.
Objection was made to the reference in the first of these amendments to putting “and environment” in the responsibilities of the ONR. I have no desire—and my previous colleagues at the Environment Agency would no doubt shoot me if I had—to change the boundaries of responsibility between the EA and the ONR. It is important that they are both operating in this area and operating to their own expertise. However, it is also true, if you look at nuclear processes, and some other processes as well, that the hazard involved, the potential risk and the need for minimising that risk is not only to the personnel in the immediate area and those who may be visiting in the immediate population, but also to the environment. If my noble friend Lord Judd lives 12 miles from Sellafield, he will know what I am talking about. If anything were to happen at Sellafield, not only would he and the population in his village be at risk but the totality of the environment of West Cumbria would be at risk as well. It is therefore important that, in approving a particular process or way of dealing with that process, the ONR at least takes cognisance of the fact that there is an environmental dimension. The expertise and regulatory authority may rest with the Environment Agency but the ONR will also have to take that into account. I do not find that confusing; it rounds off what the responsibilities are but does not change the regulatory boundaries.
Baroness Verma
My Lords, the amendments in this group respond to a number of issues, the majority of which were raised in Committee or by the Delegated Powers and Regulatory Reform Committee. They are intended to add further clarity to the Bill.
Amendments 77 and 78 have been tabled in response to the suggestion of the noble Lord, Lord Whitty, that we define “associated sites” within this part of the Bill. I thank him for his contributions to the debate and hope that he finds that the proposed definition adds clarity to Part 3.
Amendments 79 to 82 are made in response to the DPRRC’s recommendations that a parliamentary procedure be applied to the production of approved codes of practice. A procedure akin to the negative procedure will now apply to any issuance or amendment of an ONR code, and the Secretary of State’s approval must be granted for the withdrawal of such a code.
Amendment 83 has been tabled to ensure that the provisions on disclosure of “protected information” in Schedule 9 apply to information shared by HMRC under Clause 89 and an inspector appointed by the ONR under the Health and Safety at Work etc. Act 1974.
Amendment 84 aligns the definition of “relevant provision” in Schedule 10 with the definition in Clause 73.
Amendments 85 to 87 apply the affirmative resolution procedure to the first set of nuclear regulations that the ONR makes under the Bill, any nuclear regulations which amend the Nuclear Installations Act 1965 or the Nuclear Safeguards Act 2000, and any such regulations that create new offences. This is in response to the recommendations made by the DPRRC, for which the Government are very grateful.
Amendments 88 to 90 will allow the Secretary of State to make transitional provision for the ONR to continue to apply certain regulations under the current regulatory regime until specific regulations are made for the ONR. This includes provision for the conduct of inquiries and the current health and safety fees regime for the nuclear industry. These small amendments will allow us to make a smooth transition to the statutory ONR and will also ensure that the ONR is not significantly reliant on grant in aid for the first few years of its existence.
Amendment 91 clarifies that compensation can be paid by the Secretary of State only in respect of property transfers and not in respect of staff transfer schemes.
Finally, Amendment 92 has been added to allow for regulations to be made jointly under the Energy Bill and the Health and Safety at Work etc. Act 1974 where the Energy Bill requires an affirmative resolution procedure to be followed. Where this is the case, we have chosen that the route followed by such regulations should be subject to the subordinate legislation provisions in Clause 104.
I hope that noble Lords are satisfied with my explanation of these amendments and can agree to their inclusion in Part 3 of the Bill. I beg to move.
Lord Whitty
My Lords, I very much welcome these amendments. Obviously, I particularly welcome the ones that relate to my suggestions for the definition of sites. I think that they make a significant improvement and add clarity.
I am sure that were the noble Lord, Lord Roper, here, he would very much appreciate the move in the direction of the Delegated Powers Committee that the Government have taken in introducing a number of these other amendments. It is always right that any Government should not only take note but follow the advice of the Delegated Powers Committee’s recommendations, otherwise they would find themselves in serious trouble. The Minister has managed to avoid that, at least in this part of the Bill.
The transitional provisions in Amendments 88 to 90 also seem sensible. I welcome the amendments and hope that the House will accept them.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Lord Whitty (Lab)
My Lords, I register our support on these Benches for the amendment, although the Minister will already have detected that this is a big conspiracy by Sub-Committee D to get its report discussed again at this late stage. I was party to that. However, as the noble Lord, Lord Cameron, has said, there is enormous possibility here.
I will make only two points. First, as long as there is a sniffy attitude towards interconnectors in any of the European energy markets, we are all going to be operating at higher cost than we need, with greater misery for consumers and, eventually, higher cost to the taxpayer. Secondly, this matter is not separate from the rest of the Bill. When asked earlier in the proceedings where their CFDs could apply in relation to supply from French nuclear power stations or Irish wind farms, the Minister said that in certain circumstances they probably could. That is important. It is not tomorrow’s solution, but it could be quite important as long as they were connected with projects here. The same question arises with the capacity market. This is potentially a hugely important way in which we maximise our capacity, and therefore the report to which the noble Baroness, Lady Parminter, refers is important. Whether the Government want to put it in the Bill or not, they really ought to be looking at the strategy for interconnectors as an integral part of overall energy policy.
Baroness Verma
My Lords, I am grateful to my noble friend Lady Parminter for raising the matter of electricity interconnection, which the Government agree is an important area given the range of potential benefits. Through my notes I will also be able to answer my noble friend Lord Caithness’s two questions.
We have previously considered the amendment in Committee. The Government considered the arguments made and, earlier this month, committed to publishing a policy statement on electricity interconnection by the end of 2013, well in advance of the date which my noble friend’s amendment would require. This will set out our support for increased interconnection that is appropriate and economic. My noble friend will be aware that the Government also recently supported a number of interconnection projects to become projects of common interest under the EU regulation on guidelines for trans-European energy infrastructure. The UK Government support that regulation and its intention to accelerate completion of the internal energy market by facilitating cross-border energy infrastructure. Five GB electricity interconnection projects have been selected as projects of common interest under the regulation, including with France, Belgium and Norway. They will enjoy streamlined planning procedures and, where appropriate, a mechanism to agree cross-border cost allocation. They will also be eligible to access financial instruments such as loan finance, grants for feasibility studies and, potentially, grants for work under the Connecting Europe Facility, which has a pot of €5.1 billion over seven years. Four renewable generation projects located in Ireland, with potential to develop into interconnection, were also selected as projects of common interest. This brings the combined capacity of all potential interconnection projects currently in the pipeline to more than 12 gigawatts. My noble friend will also have seen our proposals for how interconnected capacity may be able to participate in the capacity market from 2015. We are currently working proactively on the details of this proposal and we will welcome further engagement with stakeholders to try to make this possible.
I also highlight work being undertaken by Ofgem to develop a supportive approach to interconnection. Ofgem is developing a new cap and floor regulatory approach for interconnection for application to the proposed Project NEMO between GB and Belgium. The Government are confident that this approach, if extended, will promote investment in interconnection. However, as the cap and floor approach looks to consumers potentially to take on some risk, it is important that careful consideration is given to its application. We are working closely with Ofgem as it takes forward its wider Integrated Transmission Planning and Regulation project, considering the need for enhanced planning or strategic evaluation of future interconnection. Ofgem is also working to ensure that GB electricity prices reflect scarcity to a greater extent. As interconnection developers invest on the basis of price differentials on either side of the link, this is likely to make investment more attractive.
I hope noble Lords will appreciate that, following Committee, the Government have made a public commitment that will satisfy the intention behind this amendment, and do so sooner than the amendment itself would require. I therefore hope that my noble friend will be reassured and will feel content to withdraw her amendment.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Lord Whitty
My Lords, Amendment 55ALB is largely an attempt to get greater clarity than we got on, I think, the second day in Committee about the way in which the Bill as a whole applies to Northern Ireland. There is also the particular question of why Northern Ireland is referred to here in relation to investment contracts with the Northern Ireland generator, and whether that actually means generation in Northern Ireland into Great Britain. At the moment, the whole balance of interconnection is into Northern Ireland, with both the gas pipeline and the electricity line, and there is a separate issue between Northern Ireland and the Republic.
As I have said before, Northern Ireland has a very different energy market structure. It has a dominant supplier and a different systems operator, which is in part owned by interests in the Irish Republic. There is a wholesale electricity market that is jointly operated with the Irish Republic. The consumer regulator works on very different precepts than Ofgem, in that it is still, essentially, a price-regulation process. Finally, of course, consumers there face different problems and higher prices. I suppose I should declare a slight interest and an affinity in that I have done some work for the Consumer Council in Northern Ireland.
I have never quite understood how contracts for difference apply in Northern Ireland within that structure. I can see that capacity payments might apply, because the history relates to what they used to call availability contracts in Northern Ireland and the island of Ireland as a whole, which were quite expensive to consumers and business in Northern Ireland. However, I do not really see how investment contracts apply in Northern Ireland, particularly if they are ongoing—in reply to my noble friend just now, we are not in favour of putting an end date on the period in which investment contracts are issued. Rather than go into vast detail on this last day in Committee, I simply ask whether the Minister could contrive with her department, possibly in conjunction with DETI in Northern Ireland, to produce a paper that would indicate to us, before we reach Report, just how this operates in Northern Ireland. I am still bemused and suspect that those who have even less familiarity with the situation in Northern Ireland are even more bemused. There are references to Northern Ireland all the way through the Bill.
There is one other particular point in this amendment, which was raised, if I remember rightly, by the noble Earl, Lord Caithness, in an earlier debate. There are references to the department rather than to the Minister, whereas for the other devolved Administrations, there are references to the Minister. That sounded on the face of it to be a bit of a hangover from direct rule, and an explanation would be helpful on that front. Northern Ireland is distinct from Scotland and Wales in this regard because energy is a devolved matter in Northern Ireland. However, this provision appears, in one sense, to provide for the possibility—not necessarily the absolute certainty—of the schemes that we are devolving in vast detail for Great Britain being applied in Northern Ireland. If it only relates to the possibility of Northern Ireland supplying some electricity into the GB grid, that is a slightly different and probably unlikely matter. The Minister can probably answer this point fairly succinctly. If she is prepared to let me have a note over the summer that could be circulated to the other Members of the Committee, explaining how this applies to Northern Ireland—one which she has agreed with her Northern Ireland counterpart—I will say no more about it. I beg to move.
Baroness Verma
My Lords, I again thank the noble Lord, Lord Whitty, for his amendment, which would require investment contracts relating to electricity generation stations in Northern Ireland to be entered into jointly with the Minister for Enterprise, Trade and Investment. Instead, the Bill currently provides for a contract to be entered into with the consent of the Department for Enterprise, Trade and Investment. For the information of the Committee, I will lay out our position and then try to respond to the noble Lord’s questions.
The amendment would add the Minister for Enterprise, Trade and Investment as a party to the contract, but it would not confer the powers in Schedule 2 relating to administration and payments under the contract, which apply only to the Secretary of State. This would create serious practical difficulties in administering the contract.
It is not clear from the amendment as drafted what obligations or liabilities the Minister for Enterprise, Trade and Investment would have under the investment contract. Furthermore, there is no power currently in the Bill that would allow the Northern Irish Minister to transfer the investment contract to the CFD counterparty once that is established, as we envisage will happen for all investment contracts. It is difficult to see how this would work in a tripartite arrangement given the current powers.
The Secretary of State’s powers in Schedule 2 extend to Northern Ireland to ensure payments can be made to electricity generation stations in Northern Ireland. This position has been agreed with the Northern Ireland Executive, and the Northern Ireland Assembly passed a legislative consent Motion on 12 February to enable the UK Parliament to legislate to provide the Secretary of State with these functions.
I reassure the noble Lord that gaining the consent of the Department for Enterprise, Trade and Investment will include gaining the consent of its Minister. The Minister will therefore need to give consent to any investment contract relating to generation in Northern Ireland.
The noble Lord asked how CFDs would apply in Northern Ireland. UK and Northern Ireland Ministers agree that the preferred approach is a UK-wide one with an associated institutional framework. We are working closely with the Northern Ireland Executive to design the application of the FIT-CFD for the whole of the UK. UK Ministers will set FIT-CFD strike prices in Northern Ireland in conjunction with Northern Ireland Ministers and the cost of support will be socialised across the UK. However, Northern Ireland Ministers will maintain the right to set Northern Ireland-only strike prices for CFDs, if required.
I hope the noble Lord is reassured that we are giving an important role to the Department for Enterprise, Trade and Investment in relation to investment contracts in Northern Ireland. Given that reassurance, I hope that he will agree to withdraw his amendment. He asked me to write to him on a question he raised to which I do not have the answer at the moment. I will look at Hansard carefully to ensure that I have given him and the Committee a response to points raised earlier in the debate on his amendment.
Lord Whitty
My Lords, I thank the Minister for those comments and look forward to receiving a letter from her. However, what I am really looking for is something which explains how we envisage CFDs applying in the very different market in Northern Ireland in the same way as they apply in the market in Great Britain. I am sure that all the political niceties have been followed but I still do not see how the pattern is replicated within Northern Ireland. I can see that it can be replicated in terms of the possibility of Northern Ireland supplying energy to the GB grid, but that is a separate matter. Given all the complications of the very different Northern Ireland structure, including the all-Ireland complications, I still find it difficult to see how this measure applies. Therefore, something a bit more than a letter will probably be needed to convince the Northern Ireland authorities that they should go down this road. There must be something which sets out how the measure applies within Northern Ireland, even if it is a fairly technical background note which hardly anybody understands, or hardly anybody over here understands. Other documents of that nature have been floating around. It would be useful to have it in our hands before we return to this point.
On the question of the Minister for the Department of Energy and Climate Change, I understand what the Minister said and I will not press that point. It just looks slightly odd when we refer to Scottish and Welsh Ministers but to Northern Ireland departments. Again, that is a presentational matter, which perhaps the Minister will have another look at. It is not central to my question, which is: how do these three new forms of supply contract apply in a very different market? For example, is there to be a separate counterparty, or is it the same counterparty we are talking about? If it is the same counterparty organisation, how does that relate to Northern Ireland’s devolved responsibilities and to that of the Ministers there?
I think I have probably said enough to give somebody a couple of months for a few communications between Belfast and Whitehall to perhaps set this out in ways that I and other Members of the Committee will be able to understand. With that, I beg leave to withdraw the amendment.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendment. The Government are fully committed to ensuring transparency of investment contracts. The existing provisions are clear that in order for a contract to become an investment contract it must be laid before Parliament and published in order to benefit from the powers in the Bill. In addition to the contract itself, the Bill requires that the Secretary of State makes a Statement to Parliament that he considers that the contract would encourage low-carbon generation; and that without the contract, there is a significant risk that the electricity generation would not be built or would be significantly delayed. The Statement must also summarise the regard that the Secretary of State has had to the impact on energy security, decarbonisation, affordability and the renewables directive targets.
For the Hinkley Point C investment contract, the Government have already committed to publishing a summary of the reports from external advisers and the value-for-money appraisal of any contract agreed. With these provisions, we are trying to achieve a delicate balancing act between making available as much information about the contract as possible, while at the same time allowing commercially sensitive information to be withheld from publication. It would not be appropriate to publish this information if it would risk significantly damaging the developer’s commercial interests. However, it is crucial that the developer can provide such information to enable us to be confident that the contract represents good value for money for the consumer.
I believe that the current wording of the Bill strikes this balance appropriately. The information that can be withheld from publication, as the noble Lord said, is information that is a trade secret, would prejudice a person’s commercial interests and would constitute a breach of confidence. The key commercial information—the strike price and the reference price—cannot be withheld from publication. While the Bill was being discussed in the other place, the Government identified two areas where we are able to further improve transparency of investment contracts.
First, we decided that alongside the investment contract that is laid before Parliament, the Government will also publish a description of the information that has been withheld, and the reason for doing so. Secondly, we removed the Secretary of State’s discretion to withhold information from the contract after it has been agreed but before it has been laid before Parliament. This means that any confidential information will have to be clearly identified as such during contract development, and there is no further discretion to withhold information once the contract is concluded. These commitments and legislative improvements ensure that there will be transparency in investment contracts, and that only the most sensitive information will be withheld from publication.
The noble Lord, Lord Whitty, asked why the Government resisted amendments to the Bill to restrict the definition of confidential information to information that is a trade secret. The Government’s intention is to publish as much information on investment contracts as possible. As I have already laid out, the extra things that we committed to after the Commons Report stage have now been put into the Bill. I hope that the noble Lord is reassured by the explanation that I have given and will withdraw the amendment.
Lord Whitty
My Lords, I am reassured only to a limited extent. I thank the Minister particularly for her reference to the fact that one has to identify what is going to be commercially confidential early in the process and that one cannot change that at a later stage. That was a reflection of a discussion in the Commons.
However, it still seems to me that sub-paragraphs (3)(c) and (3)(d) are expressed in extremely wide terms and I am still not clear what would constitute a problem not already covered by trade secrets, particularly under sub-paragraph (3)(c). Without being a total conspiracy theorist, one must recognise what lies behind the anxiety here. I shall have to choose my words carefully because, as the noble Baroness has said, we are in negotiations over one nuclear contract. However, people believe, particularly in relation to nuclear power, that historically things have been agreed by Governments over and above what has been disclosed publicly. Some of that is related to state security but some is related to regulation planning permission and other payments. In other words, there is a suspicion that in order to gain a commitment for a contract for difference it is conceivable that the strike price is not the only commitment that the Government make and that there may be other commitments. If that were to be a suspicion which the Government would find it difficult to counter, they could find themselves in a difficult public relations situation further down the line.
I hope that I am being overparanoid but, believe me, there are other people who are far more paranoid than me, not least in the media, and it will be important that Government are seen to be squeaky clean regarding these contracts.
Baroness Verma
My Lords, perhaps I may try to further reassure the noble Lord that the reason why certain parts of the information will be trade secrets is, for example, when allowing the future actions of a company, such as in relation to a potential financing structure. Basically, this relates to future financing—issues such as those are always commercially sensitive—rather than anything else.
Lord Whitty
I understand that, and it would be possible to express those provisions in slightly narrower terms than the exclusions in the Bill. I shall leave it there. It is a warning that this could be a danger for the Government and for those who want to see some contracts for difference signed, particularly in the nuclear industry. If there is any feeling that something has not been disclosed, future Governments may well suffer from it. I thank the Minister for the reassurances that she has given. Before the end of the process, the Government should make a few more but, for the moment, I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Lord Whitty
My Lords, we have jumped to the transitional arrangements for the move from ROCs to CFD. This is an incredibly complex clause about how that will happen. I have refrained from trying to alter the main parts of the clause because a lot of work has obviously been put into it. Effectively, those who have ROCs will at some point have them exchanged for fixed-price contracts, which may run until 2027. At that point, they will have to be sold back to the purchasing authority, which, in principle I suppose, is Ofgem, but could be the counterparty or the Secretary of State. Alternatively, they could be sold in the market and then sold back to the system. ROCs or their like-for-like replacements will be around for some time, but only those that apply to existing projects.
We spent some time discussing the dynamics of much of the renewables industry and how we have achieved growth rates and advancements; we were all complimentary about the dynamism of the sector. It is also true in many cases that the dynamism of the planning system, and of getting the supply chain and sometimes investors in place is not quite as nimble as that of the entrepreneurial skill being shown in the renewables sector itself. In the pipeline, therefore, are lots of projects whose economics and financing started by being based on the expectation for ROCs and whose investors have invested on the expectation of a ROCs system applying to them.
At some point, the Government have indicated that no new ROCs-based projects will operate beyond 2017. That, however, does not appear to be reflected in the legislation, as far as I can see—certainly not in the rather lengthy Clause 46. However, some projects whose calculations and return on investment will have been based on ROCs provisions will come on stream between now and 2017.
This amendment attempts to put into legislation the fact that there will be three years of overlap, with a ROCs system running in parallel with the new CFD system—or probably the investment contracts system and then the CFD system. I know that there is a horror in DECC about running different subsidy systems in parallel. I have never quite understood why the department has such an absolute objection to that, as some schemes are more appropriate under, say, feed-in tariffs than they are under ROCs and some will be more appropriate under the new regime.
The amendment simply attempts to say that there will have to be a period when projects that have been in the pipeline for some time on the basis of ROCs are still allowed to start on ROCs and to get into the system. That is all the amendment suggests and I think that it reflects what the Government have, in one sense, already said—that when the Bill comes into effect some time next year, there will be a three-year overlap period. However, we would like to see that in legislation. Some of these projects are now causing anxiety and hesitation because people do not know what will happen, and some investors are getting nervous and projects are being stalled as a result. Therefore, we would like to see that written in and we would like confirmation that that is indeed the Government’s intention. I beg to move.
Baroness Verma
My Lords, I am most grateful to the noble Lord, Lord Whitty, for his amendment but I hope that in a few moments I will have convinced him sufficiently to withdraw it.
Amendment 55AJA would require the transition period, when new renewable generators will have a choice of scheme between the renewables obligation and the CFD, to last for a minimum of three years. Our long-standing intention is that the RO will be closed to new generation from 31 March 2017 and that the new support mechanism, CFDs, will be introduced next year. This will deliver the new mechanism well in advance of the closure date of the RO and provide a suitable transition period when investors can choose between either mechanism.
Our priority in providing this transition period and the choice between support schemes is to promote investor confidence and certainty, and to ensure that there is a smooth shift from the renewables obligation to contracts for difference. The amendment would require the RO to be kept open beyond the intended closure date of 31 March 2017. The design of the RO is based on the setting of an annual obligation, which determines RO expenditure for each financial year. This means that closing the RO at a random or uncertain point during a financial year is inadvisable. A minimum transition period, such as the noble Lord proposes, would in practice be likely to mean keeping the RO open to new entrants until 31 March 2018.
Such an extension would increase costs to consumers. More generators would be able to make use of the less efficient support that the RO provides for an additional year, rather than seek support under CFDs. This would undermine the overall transition to EMR and could have an impact on the UK’s ability to meet our 2020 renewables target. Because the RO is a less efficient mechanism than CFDs, we would be able to afford less new renewable capacity in total, which I know is not the outcome that the noble Lord intends.
In addition, investors accredited after 31 March 2017 would get less than 20 years’ support, as the RO final end date is 31 March 2037. Keeping the RO open after 31 March 2017 would mean that we would need to hold a further review of RO support levels for the period beyond that date. That would also have an impact on investor certainty, as it would take time before they knew what the RO support levels were after 31 March 2017.
However, I appreciate that the closure of the RO to new generation has been of concern to some investors. The Government have listened to those concerns and, as part of the RO transition consultation launched on 17 July, we confirmed that we will offer grace periods for those generators aiming to accredit under the RO before the closure date. Generators eligible for grace periods will be able to get RO support even if they do not commission before 31 March 2017. We are consulting on the length of grace periods and on the eligibility criteria. The principles proposed in the consultation are that the eligibility criteria must be straightforward to prove and assess, and must be consistent with the intention to transition to CFDs. That will ensure that grace periods are available as needed to ensure investor confidence but do not involve an outright extension of the RO. To help investors we announced CFD strike prices ahead of schedule and published the draft delivery plan for consultation last week.
We remain committed to implementing EMR next year and providing a suitable transition period—currently over two and a half years. There has been six years’ advance sight of the timing of the RO closure to new generation. We are consulting on grace periods to address any remaining concerns about the timing of closure. In contrast, setting a minimum term for the transition period within the Bill might have adverse effects that greatly damage investor confidence. I have listened carefully to the noble Lord and will read Hansard line by line to make sure that my explanation satisfies him. At this point, I hope he will withdraw his amendment.
Lord Whitty
My Lords, I thank the noble Baroness for that reply. It gives me some comfort but there are a number of uncertainties on both sides here in the sense that those behind some of these schemes thought that they would be commissioned at an earlier date than they will be, so their calculations are based on that earlier date. The Minister is clearly right to say that we had six years’ sight of ROCs ending but we have not had six years’ sight of what will replace them. Therefore, decisions were made on the ROCs system or something very like it operating until that point. I would not like to see a delay because of a planning appeal, or some other reason why the commissioning date slips, which might have a detrimental effect on some very good schemes in the pipeline that we would wish to encourage.
I am heartened by the noble Baroness’s reference to grace periods. I will look at the consultation document more carefully. Although I knew it was issued last week or the week before, I was not clear that it would affect this so directly. That would give some comfort. I hesitate to mention it, but there is a possibility on the other side, namely that the introduction of CFDs, or the clarity of what the choice might be between ROCs and CFDs, might be delayed. An issue I have not mentioned since Second Reading must still slightly worry the Government: we have not cleared any of this through state aid. Were there to be a delay on that, a lot of the dates would have to slip whatever was written in legislation. While I was mainly concerned about delays in projects based on ROCs, there is the possibility of delay on the government side, which none of us wants to see. That would also have consequences for the way we deal with those projects in the pipeline.
I got sufficient comfort from the Minister to withdraw the amendment at this stage but I put that slight warning light in our minds. We may well have to return to the more general subject on Report, by which time I hope the Government have something positive to say on it.
Lord Whitty
My Lords, this is probably the most straightforward amendment that I have ever produced; however, it has vast repercussions for the whole Bill. For those noble Lords who have not read it, it seeks to replace “a” with “the”, in reference to the counterparty, certainly in the section that deals with CFDs.
I have made reference to this at various points in our proceedings; we have not really smoked out from the Government how they see the counterparty operating and what sort of counterparty they have in mind. They have said that there will be a single counterparty private organisation backed by the Government. That is not what is stated in the legislation. The amendment would be a bit late in the sense that there is still provision in Clauses 8 and 9 for the Secretary of State contemporaneously to designate more than one counterparty. I understand the Government’s position in relation to CFDs—there is a separate provision that we will consider on Monday in relation to investment contracts—to be that at any given time only one counterparty should be designated by the Secretary of State.
It is hoped that that counterparty would last some considerable time and that even redesignation, or taking designation away, would be rare, but you need those reserve powers. However, you do not need the reserve powers to have more than one counterparty running at the same time. Indeed, I never quite understood why anybody thought that that would be sensible. The structure is difficult enough already. There is a regulator, a counterparty and a systems operator, and then there is the Secretary of State and all the regulations that are directly down to the department. To crowd it out with several counterparties engaged in different contractual relationships, probably with the same company, always seemed to me fairly daft. Therefore, I hope that before we finish with the Bill the Government themselves will delete those provisions that allow more than one counterparty to be designated.
Because there is constant reference to counterparties all through this clause and the reference is always to “a counterparty”, that keeps open the possibility of there being more than one. If we said “the counterparty”, I would be much happier, although it would require quite a lot of reprinting of the Bill. I started to try to change it in several different places but I gave up at three o’clock in the morning, so I have tried it out in two places here.
There is a serious point behind this. Clarity and simplicity is needed here. It occurred to me earlier that there could be a very specific reason for this wording, in that there would need to be a separate counterparty in Northern Ireland. There will be a separate counterparty for investment contracts but, as I said, that is dealt with in the next section. However, if there were a general expectation that the possibility of having more than one counterparty in this field at any given time was what the Government wanted to keep open, I would be very alarmed, and I do not think that I would be alone in that.
These amendments are intended to give the Government the opportunity—either now or when producing a more detailed document on the nature of the counterparty as now envisaged, which we can study in detail over the summer—to set out what their intentions really are. I beg to move.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for these amendments and I hope that I shall be able to allay his concerns. I am aware that the ability to have more than one counterparty previously caused concern in the other place. The ability to have more than one counterparty is only to facilitate a transfer from one counterparty to another in the unlikely event that this is necessary. We sought to provide reassurance on this with amendments at Report in the other place and I hope to further reassure the noble Lord today.
There can be only one counterparty to a CFD contract. A generator will always know who is on the other end of its contract. Under this Bill, there cannot be a return to the original multiparty model that raised significant concerns among the industry and in the Energy and Climate Change Select Committee in pre-legislative scrutiny. The CFD counterparty was introduced specifically to address those concerns.
However, in the unlikely event that the CFD counterparty fails or withdraws its consent, we must ensure a smooth transition from one counterparty to another to make sure that generators can continue to get paid under their contracts and that the contracts can continue to be allocated. To meet any concerns that the policy intention here is unclear, the Bill was amended in the other place so that the ability to designate more than one counterparty can be used only where it is necessary, broadly speaking, for the purposes of ensuring that payments continue to flow or that contracts continue to be allocated. These limited circumstances are set out in Clause 7(5).
I hope that the noble Lord understands the reasoning—that is, of there being a counterparty in case one fails—and that he feels able to withdraw his amendment.
Lord Whitty
My Lords, I thank the Minister for that explanation. I had sidelined Clause 7—I think I referred to Clause 8 just now, but it is Clause 7. That does not seem sufficiently to cover the case of a counterparty body having failed but still having obligations and commitments which need to continue. There are many situations in administration where a designation ceases and is given to somebody else. It is a fairly narrow requirement to say that the counterparty, or whatever body is involved, shall continue to meet all its obligations. There will be a contractual obligation for it to do so anyway. I ask the Government to look again at whether Clause 7(5) is indeed tight enough to avoid the implication that there might be more than one counterparty.
I am happy to leave it at that. I will probably return to this issue in relation to the potentially different counterparty for the period when we have investment contracts, but we can discuss that later. Subject to that, I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Lord Whitty
My Lords, my name is also on this amendment and I sat on the same committee, as the noble Earl, Lord Caithness, indicated. We are debating that whole subject on Monday night. The noble Lord, Lord Cameron, and the noble Baroness spelt out the general thesis of that report and I do not intend to repeat it.
I say to my noble friend Lord O’Neill that I do not think he entirely deserves the strictures from the noble Lord, Lord Deben, on fictional characters, but he does like to stir up a little controversy. In a sense, the title that we chose for that report in the sub-committee was intended to pre-empt the sort of attack that my noble friend Lord O’Neill produced. It is that no country is an island in relation to energy supply—not Scotland or Great Britain. Indeed, the other part of the United Kingdom, Northern Ireland, is already utterly dependent on interconnectivity both for its gas and electricity. The idea that we should ignore interconnectivity as part of the solution, particularly when we are discussing capacity markets and capacity mechanisms, seems to ignore something obvious. Certainly, by the end of our deliberations on that committee, it became obvious to us.
The noble Earl, Lord Caithness, asked what the Secretary of State’s response was to the committee. I thought that we had a very good session with the Secretary of State. He took it up. He obviously had some briefing and had to be a little cautious, particularly on delivery within the European context, but he was keen that we should take it up. To be fair to the Government, they have picked up this point but it is not yet reflected in the Bill.
The amendment of the noble Baroness, Lady Parminter, gives the Government a chance to have another look at this and see what relationship there is between an attention to interconnectivity and both the contracts for difference, which could include a contract for difference for generation occurring outside the United Kingdom, and the capacity mechanism, which should also include provision for interconnectivity to be part of it. Indeed, it is an obvious part of an overall capacity mechanism. Two-way connectivity must be a way of bringing down costs across Europe as a whole with the development of an internal market which at present does not really exist, despite what the Commission claims on occasion. That must be to the benefit of the costs of investment in energy as a whole and ultimately to the price to the consumer, whether a domestic or industrial consumer.
The message from our report—and that message also lies behind the requirement that the amendment would place on the Government—is to develop a UK strategy in order to push forward the European agenda on this, but with particular reference to those bits of interconnection between us and Ireland, us and France and potentially further afield in Norway, Iceland and Holland. For all those reasons, this needs to be seen as a way of meeting our energy requirements.
Unfortunately, in this context, the Government are not being as ambitious as the Secretary of State was in his response to the committee. They are saying that connectivity would effectively be regarded as a passive contribution. For example, in the letter that the noble Baroness wrote recently—noble Lords may have seen it—she says that if interconnection provided 2 gigawatts then clearly that would have an effect on overall costs and would be of benefit. However, that is looking at it in a very passive way. If we developed a strategy, we could look at the matter in a more constructive and creative way as one of the major contributions of the diversity of sources to meeting all our objectives: energy security, decarbonisation and lowering the price to industrial and domestic consumers.
Interconnectivity is big in that respect, and significant in avoiding disruption and shortages. My noble friend Lord O’Neill ought to look at this matter again and accept, without determining what the outcome of such a strategy should be, that part of the jigsaw must be a strategy on interconnectivity. I therefore strongly support the amendment.
Baroness Verma
My Lords, I am grateful to my noble friends Lady Parminter and Lord Teverson, and the noble Lord, Lord Whitty, for providing me with an opportunity to respond on the very important issue of electricity interconnection.
I turn first to Amendment 55ZB on electricity interconnection. The physical linking of the GB electricity market to others in Europe has the potential to offer a range of benefits, as my noble friend has ably set out. The Government firmly believe that greater levels of interconnection would be good for Britain and build on the 4 gigawatts that we have. A large number of interconnector projects are at different stages of development, including to Norway, Belgium, France and Ireland. Indeed, when you add up the capacity of potential projects, it comes to more than 12 gigawatts.
The UK Government are already playing an active role in seeking recognition of several UK interconnection projects as European projects of common interest under the EU regulation on guidelines for trans-European energy infrastructure. This regulation, which the UK Government were actively involved in negotiating, aims to accelerate the development of cross-border energy infrastructure with a view to completing the internal energy market.
Successful projects are due to be announced in early autumn, and will benefit from streamlined planning procedures and, where necessary, a mechanism to agree cross-border cost allocation. They will also be eligible to access financial instruments such as loan finance, grants for feasibility studies and, potentially, grants for works under the Connecting Europe Facility—a pot of €5.1 billion over seven years. The Government also continue to discuss interconnection with our counterparts across Europe. My noble friend may be aware that the Prime Minister committed last year to supporting the development of an interconnector with Norway, and we have signed a memorandum of understanding with Iceland to explore the possibility of linking our markets.
In part, the large number of projects in development is due to work that Ofgem has been doing to develop a new regulatory approach for interconnection. This “cap and floor” model retains the market incentives for interconnection but reduces some of the risks to revenue that merchant developers face. This regulatory model is initially going to be applied to the project with Belgium, Project Nemo. Cap and floor has real potential in driving forward interconnector investment but, by its very nature, looks to consumers to potentially take on some risk in return, which will need careful consideration. Ofgem is taking this into account as part of its wider integrated transmission planning and regulation project, in which it is exploring whether there needs to be enhanced planning or strategic evaluation of future interconnection.
I should also like to highlight two further important developments that are taking place. First, developers invest on the basis of price differentials on either side of the link. Ofgem is working to ensure that Great Britain’s electricity prices reflect scarcity to a greater extent, thereby increasing the incentives for investing in interconnection. Secondly, on 27 June, the Government committed to continuing to explore ways in which interconnected capacity can participate in the capacity market. This is not simple and no other country has found a way to do this, but a solution could further increase investment appetite. It is worth reflecting that the single market is about not only the infrastructure between member states but the way in which that infrastructure operates.
The Government, with the support of Ofgem and National Grid, are playing an active role in the development of the European technical codes that will govern how trading over interconnectors will work in practice. This is essential if the full benefits of the infrastructure investments are to be realised.
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, for his amendments. Amendments 55ZF and 55ZG would set up an expert panel to provide independent advice to the Secretary of State on setting strike prices, development of contract terms and whether to issue CFDs or investment contracts. These are extremely important matters and I am grateful to the noble Lord for the opportunity to debate them.
The Government wholly agree with the noble Lord that independence, expert scrutiny and engagement with a wide range of stakeholder views are important principles. For the purposes of setting strike prices for renewable technologies, we are ensuring that the process through which those strike prices are set is transparent, robust and informed by a full range of expert input and stakeholder consultation. On 17 July, we launched a consultation on the proposed strike prices to allow industry and all other stakeholders, including consumer groups, to scrutinise the evidence and analysis that informed them. We are asking for their feedback to inform the final strike prices.
Further, to ensure that the strike prices proposed by the Secretary of State in the draft delivery plan were informed by independent advice, we asked National Grid to conduct analysis to help to understand the potential impacts of strike prices on government objectives. We also commissioned an interim panel of technical experts to scrutinise that analysis impartially. Both those reports were published alongside the draft EMR delivery plan and copies deposited in the Libraries of this House and the other place.
The process allows us to be confident that the strike prices are informed by robust evidence in an appropriately transparent way. We have been able to use existing powers to appoint the interim panel of technical experts, so they are already performing their scrutiny role. Following Royal Assent, we intend to establish an ad hoc advisory group, with Clause 139(2)(c) providing the spending authorisation to support this work. This, with the steps described above, will ensure that the Secretary of State makes an informed decision having considered a full range of views before setting the level of support in the final delivery plan. However, I do not agree that these principles need to be delivered by creating a new public body; we are already delivering them.
On setting strike prices for investment contracts, as we set out in our update on Final Investment Decision Enabling for Renewables, published on 27 June 2013, strike prices for renewables generation will use the strike prices published in the final delivery plan. The Government have appointed external specialist advisers to help to ensure that any investment represents value for money. We will publish summaries of reports from these advisers alongside the contract, in the event that agreement is reached, when it is laid before Parliament. In addition, the Government made commitments and amendments in the Bill in the other place to ensure that investment contracts are transparent. For all these reasons, we do not think it is necessary that there is separate scrutiny of whether an investment contract should be offered by the counterparty.
Finally, the noble Lord raised concerns that the contract terms should be subject to scrutiny and that there should be independent scrutiny before the counterparty offered a contract. I strongly agree that the terms on which the CFD or investment contracts are set need to be scrutinised. However, I consider that this should be done not by a separate expert panel but by the industry and consumer groups at large. This is why, over the past year, we have been working with an expert group consisting of industry and consumer group representatives in the development of key terms, something that I am sure the noble Lord, Lord Whitty, will welcome.
We have also had extensive discussions with industry, consumer groups and others with regard to how contracts will be allocated. The allocation process will be run by National Grid which will act within rules set out in secondary legislation to allocate CFDs to eligible applicants. The intention is that the allocation process will be rules-based and relatively mechanistic to allow investors and developers to make an informed decision about their chance of being allocated a contract. If an applicant is successful, National Grid will direct the counterparty to offer it a contract. Therefore, we do not think it appropriate to include another process which would add considerable complexity to the system.
We will shortly be publishing the CFD contract spine and further detail of the allocation process, which builds on the draft contract terms and operational framework published in November 2012. This will allow industry and other stakeholders to examine the terms of the contract and the allocation process and to discuss them further with my officials. Renewables investment contracts will be based on the final standard form CFD and therefore will be subject to the same scrutiny as aforementioned.
Before I ask the noble Lord, Lord Whitty, to withdraw his amendment I shall give some further information. He asked about the structures advising the Secretary of State and the counterparty beyond Ofgem and National Grid. For the first panel, we used a procurement process but, following Royal Assent, we intend to establish an ad hoc advisory group. We have not only made a policy commitment to establish a panel of technical experts but already appointed an interim panel to ensure they are operating in a timely and effective manner.
On reviewing strike prices, we have the opportunity to revise them through the annual updates to the delivery plan, and we intend to do that to set strike prices at an appropriate level.
My noble friend Lord Jenkin asked whether there would be enough accountability. We recognise that there is a need for robust accountability and transparency with such powers, which is why we introduced a duty on the Secretary of State to report on the Government’s activities in relation to all EMR functions provided for under Part 2. There is also a five-year review in Clause 55.
The noble Lord, Lord Berkeley, asked who made up the panel. I have a list of the members and their résumés. I think it would be helpful to the Committee if I do not spend time going through them but write to members of the Committee on the make up of the panel. I hope the noble Lord, Lord Whitty, will withdraw his amendment.
Lord Whitty
I thank the Minister for that detailed reply, and I thank my noble friends Lord O’Neill and Lady Liddell and the noble Lord, Lord Oxburgh, for supporting this amendment. I think the Minister missed an essential point. Obviously, the Government have made great efforts, and a lot of people in the industry and even in consumer groups think they have been properly consulted in the process of reaching the stage we are at. However, consultation is not the same as having a firm, continuous source of advice, independent of the department.
The names that the noble Baroness will supply us with may be exactly the kind of names we would want on a Committee of this sort. It is impossible to avoid all possible accusations of conflict of interest in this because the energy field is fairly esoteric. Nobody can be as pure as Caesar’s wife in this area, as we have probably all found, but they would demonstrate a degree of expertise. The Minister described it as an ad hoc technical advisory group, which does not provide the confidence needed in the industry, among the public, parliamentarians and consumers, that this process is being put on the best possible basis with the best possible technical, consumer, economic and legal advice.
The noble Lord, Lord Jenkin, raised the issue of judicial review. All Ministers are beset with advice from officials saying, “If you do this you will be subject to judicial review”. There are both positives and negatives from that. The process in this proposed new clause would protect people against frivolous attacks on judicial review. It would mean that the Minister had to go through a process with a body embedded in statute, had some responsibilities to Parliament and consisted of people with a wide range of technical, legal and financial expertise. I am afraid that reference to an ad hoc committee is not the same. It was also argued that it is Parliament’s job. It would probably help Parliament in the guise of select committees, as my noble friend Lord O’Neill suggested, to do its job in relation to what are vital contracts that will last for an enormously long time and have tremendous implications for our future energy situation. At the very minimum, the Government need to recognise that reassurance is needed that the proper process has been gone through.
The noble Lord, Lord Oxburgh, who is no longer in his seat, mentioned continuity. People who are appointed for four and eight years in this area will outlast every Minister and most officials. It is important that that kind of expertise is retained. I would think of extending the terms if I were writing the proposal properly. The Government may have views on that. Having that separate from the day-to-day responsibilities of Ministers and officials, and the month-to-month responsibilities of a regulator is an important part of the process that we are putting into law. We are moving into unknown territory in some respects and doing so by a leap of faith—one that is well informed by those who have been involved, but not understood by those who have not been involved.
It would be a protection for Ministers, as well as for the process, the counterparty and the Secretary of State, if we had a body with this authority, independence and statutory backing. I am disappointed that the Minister is not tempted to go down this road. As I said, I never expected her to pick up the exact wording, but this concept needs to be maintained in our minds. It may well be that we will return to this later in the proceedings. I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Baroness Verma
My Lords, I thank the noble Lord, Lord Whitty, and the noble Baroness, Lady Worthington, for tabling these amendments, which highlight the important role that the distribution network operators play in our electricity system, including in supporting electricity demand reduction. Amendment 52B seeks to ensure that distribution network operators take account of government policy as set out in Clause 5. Amendment 55ZZC would insert a requirement in Clause 37 for the Secretary of State to take account of the role of distribution network operators in a pilot scheme to permanently reduce electricity use.
Ofgem regulates through a licensing system and electricity distribution network operators need to obtain licences from Ofgem to participate in the energy market. An important aspect of this system is Ofgem’s power to set regulatory price controls, and its price control framework. This, as the noble Lord pointed out, is known as RIIO, and is well aligned with the Government’s energy policy, including the requirement for network companies to invest efficiently to ensure continued safe and reliable services, to innovate to reduce network costs for current and future consumers, and to play a full role in delivering a low-carbon economy and wider environmental objectives.
As we have previously debated, the Government are providing even greater clarity, as Clauses 119 to 126 will enable the Secretary of State to introduce a new strategy and policy statement for Ofgem to help improve alignment with government policies. In addition, my department works closely with DNOs and the wider industry, through groups such as the Smart Grid Forum, to satisfy ourselves that strategic investment decisions are being made.
On the specific issue of efficiency and reducing demand, DNOs have a licence condition on them to reduce losses, and they have been required to set out in their business plans how they will reduce losses, and to publish annual reports on what loss reductions they planned and what they actually achieved. A discretionary reward of up to £32 million will be made available by Ofgem, over the price control period, for efficient and innovative loss reduction initiatives.
In future price control reviews, when more reliable data may be available through smart meters and smart grid technology on the networks, Ofgem expects to introduce further incentives. Furthermore, Ofgem has recently extended the scope of its Low Carbon Network Fund to enable DNOs to carry out electricity demand reduction projects, which will complement the Government’s larger-scale pilot.
To reiterate the points made in our earlier debate on the electricity demand reduction pilot, while I support the noble Lord’s aim of ensuring that we test variations of the key elements associated with demand reduction projects, the Secretary of State already has the ability to design and run a pilot—or pilots—to test different approaches.
Clause 37, as I said earlier, is simply a spending power; it authorises the spending of money for EDR pilots. Our intention is design the pilot in a way that encourages projects to be delivered by a variety of organisations, including DNOs, provided the projects meet the criteria that we develop.
The noble Lord, Lord Whitty, asked why we cannot deliver eight year-old DNO plans without details under EMR. We have set out clear policy intentions—for instance in the renewables road map published last year, and in our various announcements on EMR—to move to a low-carbon energy mix. This informs the development of the DNO plans.
The noble Lord also asked why we had moved to an eight-year period. This was to encourage DNOs to work more strategically and to invest over a longer term, instead of making short-term investment decisions.
I hope the noble Lord is reassured that I recognise the important role that DNOs are already able to play in helping to realise reductions in electricity use. I hope that on that basis he feels able to withdraw his amendment.
Lord Whitty
My Lords, I am grateful to the Minister and also to the noble Baroness, Lady Maddock, for her support.
It is certainly true that there have been general indications of the Government’s direction. No doubt they are taking into account the DNOs in drawing up their plans. It still strikes me as very odd that we have here a piece of legislation, the capacity mechanism bit of which we are discussing now but the detail of which is not yet known, and it will require considerably more explanation before we finish this Bill and some serious delegated legislation thereafter. If it applies to DNOs—as the Minister rightly says in a sense it will—it must have implications for how DNOs operate. The outcome of the demand reduction must have implications. The way in which the capacity mechanism brings other people into play in the grid, and ultimately down the distribution system, must have implications. Therefore, I still find it very odd, even if they have read all the signals right—and my brief reading of the 700 pages of the Western Power document suggests that they may have missed one or two.
I am not necessarily objecting to the eight-year period, but that period has to relate to something that is operating under the wider electricity market reform. Instead, we are going to have the approval of the DNO strategic plans within the next two or three months before we know how the capacity mechanism is working, before we know how the demand reduction mechanisms are working and before we know a lot of other detail that will emerge from this Bill, which will eventually be encapsulated in the new strategy and policy statement from the Secretary of State. That will be the context in which Ofgem and the industry will have to work.
I am not trying to be awkward with the Government. I just do not think that they have the pieces in the right order or in the right place. Before we complete the consideration of this Bill, we need to be a bit clearer on how the distribution structure will operate in the new system. We should not have Ofgem definitively endorsing the plans, which it will have before it in a couple of weeks. In the mean time, I beg leave to withdraw the amendment.
Lord Whitty
My Lords, I briefly signal the support of our Front Bench for the amendments. Although I am familiar with—and may even have been one of the Ministers who rebutted the noble Earl, Lord Caithness, in—long arguments about “may” and “must”, it is slightly different here because it is not so much about parliamentary counsel’s sensibilities on these matters. “Must” is here a statement of fact. The clauses on the capacity mechanism are wide and vague—understandably, at this stage. The Minister and everyone else have accepted that we will have to translate them into secondary legislation. If we do not do so, we will not have a capacity mechanism. In that sense, there is a stronger argument than there is sometimes for substituting “may” with “must”, because otherwise the whole point of this section of the Bill disappears.
On the second point, although the noble Earl is correct to say that there have been repeated references to the interests of households and small businesses, that is in the context of the demand reduction provisions within the capacity mechanism. It is not obvious from first principles that mechanisms will be involved which benefit the small users of energy, whether they are households or small businesses. I therefore think that it helps to insert that at this point. It will help to guide the drafting of statutory instruments, when we come to that. I hope that the Government will show some sympathy to the amendments.
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.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Lord Whitty
My Lords, we have touched on this. The ECO is central to the Government’s strategy for delivering on their fuel poverty targets. We have had a lengthy debate on the context in which they will do so, and the targets and strategies that they will adopt. Clearly, their main attack on fuel poverty will be through the measures they bring to improve the energy efficiency of the homes of the fuel poor. The ECO is intended to be the main weapon for them to do this.
I have had some exchanges with the noble Baroness about how we are going on the ECO at the moment. I have received information from various sources that there are serious problems. This follows quite a good year—the last year of the old scheme, if I may put it that way—when a significant increase was recorded by the climate change committee in many types of interventions, including cavity wall insulation, solid wall treatments and loft insulation. All those schemes have now come to an end. They are all being replaced by the ECO, which in aggregate terms is less than the aggregate of the others—although the Minister pointed out that you also have to take into account the warm homes discount. That is on the other side of the equation—the income side—whereas in aggregate under the ECO, the number of schemes that will be delivered, and the aggregate cost and resources devoted to the schemes, will be less than under the pre-existing three schemes.
That would be a problem in itself, but it will be a greater problem if the way in which the ECO is being delivered is inefficient. Several sources appear to suggest that there is a serious problem with measures being brought forward under the ECO. On the climate change committee’s figures, the number of cavity wall insulation interventions declined by 60% in the first few months of the ECO regime. That is a serious teething problem. It may be a teething problem but it needs to be addressed seriously. The new structure under the various regulations introducing the ECO seems to create a problem for the cost of each individual measure as well.
I am probably not the only noble Lord who has received a letter from Scottish and Southern on this point. The supply companies have to buy from the market the interventions that they require to make up their ECO contribution. They have said, and this is quite startling, that the cost of some of those interventions under the ECO provisions is more than twice than under the old schemes. That reflects the volume but it also reflects the new system.
Scottish and Southern claims that the average cost at which it is buying cavity wall insulation, solid wall insulation and loft insulation has more than doubled under the new regime. That is also reflected in the views expressed by the insulation industry and the installers. They say that because the volume of work has gone down substantially, they can no longer send their workforce to an area where they can do four or five jobs in two or three days. They now have to go to an area where they can do only one job and then move on to the other side of the country, or the region, and carry out the other jobs. Therefore, the average cost to them is increasing. That is reflected in the prices they are offering through the brokerage system, which is therefore affecting the charge that Scottish and Southern and other electricity suppliers pay in the ECO context.
That is not a good situation. It is also having a knock-on effect in that those firms are also laying off workers. My own union, the GMB, which is the main organiser of insulation and installation workers, has seen significant layoffs already and sees more in the pipeline as the old schemes end. I have asked the Minister to give me some details about how the department sees the situation, but that is how it is seen from the point of view of the energy suppliers, the industry and the workers within the industry. If this goes on, the effectiveness of the ECO intervention is going to be substantially less than the equivalent level of resources that were provided under the pre-existing schemes.
Part of the problem, according to both the suppliers and the installation industry, is that the period over which the ECO is supposed to be operating is relatively short. Under present provisions, it runs to only 2015. That can be extended but at the moment there is certainty only over it existing until 2015. My amendments are an attempt to address this issue by, first, extending the period of the ECO in principle to 2019, giving time for this to be smoothed over; and secondly, providing for a review of how the ECO is operating. I am suggesting that we should put that in statute. If the Government are not prepared to put it in statute, they should make a commitment, in view of these assertions, that they need to look within the next six to 12 months at how the ECO is really working out.
The last stages of the old scheme are now going through their finishing stages. Everything that is starts from now on will, therefore, be under the ECO provision. Unless ECO rapidly builds to the same volume—and I hope at the same or better price—it will not deliver as great an impact on energy efficiency of homes, and thus on fuel poverty, as the previous system, even pound for pound and intervention by intervention. I want a review, which should be in the context of the ECO system lasting for a longer period because, theoretically, it is simpler than the multiple systems we had before. We need to know, however, what is really going on and whether the system and the market that has been established are operating properly. If they are, in the sense that real costs are being charged, what is wrong? Are the volume, incentives, or relations down the supply chain not right, or is there a basic flaw in the system itself? The sooner we have the answer, the sooner we can put the ECO system on a better basis, and one in which the industry, suppliers and consumers can have confidence. I beg to move.
Baroness Verma
My Lords, I am grateful to the noble Lord, Lord Whitty, for his amendments dealing with the future of the energy company obligations and the approach to replacement boilers adopted within the scheme. By way of background, ECO is worth £1.3 billion per year and is split into three obligations: affordable warmth; carbon savings communities; and carbon saving. ECO has been specifically designed to help us fight the battle against fuel poverty and to reduce carbon emissions by requiring obligated energy suppliers to invest in heating and energy-efficiency measures. Importantly, ECO is expected to be more cost effective than the Warm Front Scheme, with the delivery cost of 120,000 major measures estimated at around £350 million each year under the affordable warmth obligation. Under Warm Front, this amount of funding might have supported only 80,000 major measures, on which basis ECO is likely to be 50% more cost effective than the previous government-funded scheme. I recognise how important it is for vulnerable consumers to know how to access the support. That is why, in recognition of some of the reported difficulties, as the noble Lord, Lord Whitty, stated in his opening remarks, in identifying vulnerable customers who are eligible for help, we have provided a data-matching and referral service for ECO affordable warmth, operated by the government-funded energy saving advice service. Working in partnership with the Department for Work and Pensions, this service confirms whether a consumer meets the qualifying benefit criteria. Already, nearly 12,000 customers have been referred to an obligated energy supplier through this route. As we work on a new fuel poverty strategy to support the proposed new fuel poverty target, we will also be considering the scope for making more extensive use of data matching in future.
I turn to the amendments in more detail. Amendments 51ZB and 51ZC propose that ECO be extended to 2019, subject to a review. At the time that ECO was introduced, we indicated the intention that ECO would run until at least 2022 and the Government will, in due course, bring forward proposals for consultation on what the next phase of ECO, from 2015, should look like. In designing these proposals, it is important that we have flexibility to take account of experience under the current phase of ECO and new issues that may arise. It would therefore be wrong to restrict the future design of ECO to its current provisions. As part of our consultations on its future, we would, in any event, also consult all the organisations specified in the noble Lord’s amendment. Given the Government’s plans for the future of ECO, we believe that setting this requirement in law would be damagingly restrictive.
Energy Bill
Debate between Lord Whitty and Baroness Verma(11 years, 5 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Whitty
My Lords, I have two issues. First, I support the clarity referred to by the noble Lord, Lord Teverson, that is promoted by the amendment proposed by the noble Baroness, Lady Maddock. Secondly, there are issues relating to the cost of carbon, and so forth, which need to be reflected in energy bills, but I am not sure that I would agree with what the right reverend Prelate says in how we present that. There is a cost to all of us of carbon and to isolate it separately in a crude way would not necessarily improve understanding. The Government would have difficulties in that respect.
On the consumer issue, I would just mention the survey about unit pricing that I referred to under the earlier group of amendments. On the question of percentages, the public do not understand APRs when they take out loans, so they will not understand TCRs in relation to this operation. The Which? survey shows that three out of 10 people using the tariff comparison rate found the cheapest rate whereas more than 80% found the best comparison when they were demonstrated by unit prices. So the use of clear figures but not necessarily percentages will help in that regard, and I support the noble Baroness, Lady Maddock.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Baroness Verma
My Lords, in creating the ONR as a statutory body, it is important to ensure that the tenets of health and safety will continue to apply to the regulated community. Before I go on to respond to Amendment 38E, I should like to respond to Amendment 38U first, because it is important that I allay the noble Lord’s fears early on.
We considered in detail during the drafting of this clause that the amendment ensured that existing rights of compensation continued to remain available if people developed cancers or were subject to accidents. It is clear that it is still covered under the Nuclear Installations Act 1965, which puts in place a regime for compensating those who suffer injury or damage as a result of a nuclear incident. The regime covers nuclear incidents at nuclear-licensed sites or Crown sites, and claims are permitted to be made up to 30 years after the incident. I hope that has helped to address the noble Lord’s concerns lying behind the amendment.
In Amendment 38E, the noble Lord seeks to ensure that Section 2 of the Health and Safety at Work etc. Act continues to apply to nuclear sites in Great Britain regulated by the ONR. I can reassure him that the Health and Safety at Work etc. Act and relevant legislation made under it will continue to apply to ONR-regulated sites. This will include Section 2, and therefore I do not think that the amendment is necessary.
For clarity, amendments to the HSWA in Schedule 12 to the Bill will create the statutory ONR as an enforcing authority on nuclear sites and, as such, the statutory body will be responsible for the enforcement of all non-nuclear health and safety legislation, including operators’ compliance with the requirements for the provision of information and representation of workers. I think that that addresses the noble Lord’s fears.
Amendment 38T deals with civil liability. Clause 65 of the Bill sets out the application of civil liability for a breach of a duty contained in nuclear regulations and the safety provisions of the Nuclear Installations Act 1965.
As noble Lords may recall—I think that the noble Lord referred to it earlier—in the last parliamentary Session the Enterprise and Regulatory Reform Act amended the civil liability provisions contained within the Health and Safety at Work etc. Act 1974. The amendment would remove the provision setting out that breaches of a duty imposed by health and safety regulations would always be actionable where they gave rise to damage. Such regulations would include any made for the ONR’s nuclear safety, security, safeguards and radioactive materials transport purposes.
The amendment seeks to undermine the decision made in this House and the other place that civil liability should apply to health and safety legislation only where specific provision is made. Therefore, rather than making clear provision reversing the situation, the amendment would remove the clear wording of the existing clause, making it unclear whether a claim for breach of a statutory duty could be brought. The amendment does not seek to amend parallel provision in the Health and Safety at Work etc. Act 1974. By not doing so, it would create an unequal regime between the two major pieces of health and safety legislation in the field—this Bill and the Health and Safety at Work etc. Act. It would be inappropriate and untenable for us to create a statutory regime between the civil nuclear industry and others.
I hope that the noble Lord has found that explanation reassuring. However, if he would like further clarification and would like to meet with officials, I shall be more than happy to extend that invitation to him and to other noble Lords.
Lord Whitty
My Lords, I am grateful to the Minister for that. I am very satisfied with at least one and a half and possibly two out of three. I certainly accept her assurance that the provisions in Amendment 38U are not necessary. I was concerned that the Bill should not affect a scheme which provides a set level of damages for minor radiation activities and which has run for 30 or 40 years. I was party to the negotiations that set it up. Although there will now be very few people claiming under that scheme, there are some, and I hope that it will not be affected by the change of jurisdiction. Therefore, I am grateful for the Minister’s reassurance, which I hope is sufficient.
I do not expect the Government to change their mind about civil liability but I think that it was right for me to table this amendment because it draws attention to the consequences. The noble Lord, Lord Deben, says that we should not treat such sites any differently from any other sites. However, for all sorts of reasons, nuclear sites are dealt with differently, and the whole of this legislation deals with them differently. There is a highly subjective dimension to it and, in effect, he referred to that. If there is an incident on a nuclear site, it gets blown out of all proportion. I think that all sides of this Committee are in favour of an extension of the provision of our nuclear energy sources in this country.
We also know that it would not take a lot to turn public opinion in the wrong direction—we need only look at Germany—and for the whole strategy to fall flat on its face. It would be quite wrong if that arose because of a health and safety issue that was not provided for in the nuclear regulations, whether it concerned an omission regarding nuclear waste or nuclear material, or some other breach by the management at a nuclear plant. The reality is that the level of safety on nuclear sites, not only in respect of nuclear issues but on all others, has to be—the industry recognises this—of the highest order, and any breach must lead to a sanction.
Lord Whitty
My Lords, before the Minister replies, perhaps I might point out that most of this debate has been about a sponsoring department. I regret making what was a throw-away remark as a background to this, because none of my amendments attempt to or could reassign sponsorship responsibility from one department to another. It is entirely a matter for the Prime Minister. It is not a matter for regulation. I hope the Minister will deal with the amendments on their merits because there is clearly an overwhelming view in this Room on the matter of sponsorship. I am certainly not pursuing that today.
Baroness Verma
I am extremely grateful to the noble Lord, Lord Whitty, and I hope that I will be able to allay his fears. In fact, I think my noble friends Lord Deben and Lord Jenkin and the noble Lord, Lord O’Neill, have explained far more eloquently than I could why it is important that the DWP should remain the main sponsor body. I am extremely pleased to hear that the noble Lord, Lord Roper, has been convinced by argument and has changed his mind. That is the benefit of your Lordships’ House: we can have these detailed debates which highlight how things can be illustrated far better by people with far more experience than I have.
I assure the noble Lord, Lord Whitty, that DECC will still have appropriate statutory levers to ensure the effective delivery of policy areas for which DECC Ministers are accountable to Parliament. Such independence is a requirement of the European nuclear safety directive, which has been implemented by the UK.
I will now address the other amendments in the group, which have not had as much of an airing as the noble Lord would perhaps have liked. Amendments 38K, 38L and 38P allow for changes to how nuclear regulations are made, in particular that they could confer powers on other bodies. The Bill is deliberately focused solely on the ONR and the functions and remit that it needs to be an effective regulator. It would be a significant change of focus to make provision for conferring functions and responsibilities on other regulators and would require changes to many aspects of the Bill. In addition, any regulations made that covered the remit of another organisation could be made jointly with them, using the Bill and another more appropriate legislative vehicle. To that extent, I take the view that these amendments are unnecessary.
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.
Lord Whitty
My Lords, I thank the Minister for going through the amendments. I accept the argument in regard to people’s physical conditions, such as pregnancy, and other reasons why they should not go into certain areas, and I understand that the provision is for that. I am afraid that my suspicious and conspiratorial mind thought that it was something to do with security, with a big S, and therefore could be quite a wide and broad requirement. However, after the explanation that it is confined to those sorts of things, it is fine.
On the issue of the Crown, it seems to me that there are not many other bodies that are public bodies which have that explicit divorce from the Crown. I am not sure whether in shrinking the state, as the coalition intends to do, there is a whole range of these coming up. I assume that the ONR will never be privatised and that this is, as the Minister and I indicated, really a ruse to pay people more, which is necessary—although it is necessary for a number of other regulators, not excluding the Environment Agency’s nuclear staff, which will not be met by this change. I will not take it further now, but it is peculiar, and we will keep a weather eye open for any other use of this in relation to public bodies. We may have to consider at a later stage whether it is appropriate.
I do not want the ONR to be diverted on training, but it is the employer’s responsibility to ensure training; it does not necessarily have to provide it itself. It is explicit in the Health and Safety at Work etc Act and necessary in the HSE that the organisation has a responsibility to make sure that its people are trained up to full modern requirements. That is every employer’s responsibility but, in relation to nuclear regulation, it must be a particularly acute responsibility, which the employer ought to accept. So I do not really accept the Minister’s complacency about leaving “may” there, when “must” would reflect the status quo and what I hope is the reality of the ONR’s future regulation.
I accept that the Civil Service has changed a bit since my day when seniority used to be very important. I also accept that there is a reference specifically to pensions. But other aspects of seniority and continuous service are still relevant, including retirement dates and the point at which you can apply for, for example, early retirement on sickness or other extraneous grounds. I accept that it probably is not a point which needs to be covered in legislation. I do not think that it is a trivial point and may not be a trivial point for some of the staff who are due to transfer. With that, I beg leave to withdraw the amendment.
Energy Bill
Debate between Lord Whitty and Baroness Verma
Lord Whitty
My Lords, from these Benches, I, too, support the amendments and much of what the noble Lord, Lord Empey, has said. However, I have some serious queries. I have an amendment in this group—I will not press it because I think it is superseded by the Minister’s amendments—as it seemed to me that the requirement to consult Northern Ireland Ministers was not sufficiently reflected throughout the Bill.
I had better declare a past interest, in that last year I wrote a report on the Northern Ireland energy sector for the Consumer Council over there. It was a very good report and I recommend it to everyone—unfortunately the successor to the noble Lord, Lord Empey, did not entirely agree with it, but there we go. In the course of that, I saw that there were some very different features in the energy situation in Northern Ireland compared to over here. I therefore wonder whether the position is quite as simple as this amendment indicates. It is right that the decarbonisation target should apply to the UK—if the Northern Ireland Ministers and Executive are happy with it, Northern Ireland’s contribution to that can clearly be worked out. At present, as the noble Lord, Lord Empey, said, there is a very ambitious target for renewables in Northern Ireland—40% by 2020, which is far in advance of what we are likely to achieve in GB. On the other hand, there is still oil-fired generating capacity in Northern Ireland, at least partially, so it is a different situation. It is also a very different situation at the consumer end, which is presumably why the consumer regulations in here do not apply to Northern Ireland. Therefore, in relation to Part 1, I am fully in favour of adopting this amendment.
However, I am not entirely clear how the extent provisions in Clause 140, to which the Minister has referred, as regards particularly Part 2, and Part 3, will cover Northern Ireland. Because there is a different structure of electricity supply, it is difficult to see a clear read-across for the contracts for difference, or for that matter the investment contract provisions, with the situation in Northern Ireland. As the noble Lord, Lord Empey, and the Minister have said, there is a wholesale, all-Ireland electricity market for a start, which complicates issues. In relation to the capacity mechanism, it is also true that availability contracts are still outstanding and have been running for years in Northern Ireland and the Republic. In my judgment, consumers in Northern Ireland have probably paid too much for that capacity over the years and are continuing to do so.
It is difficult to see how the contracts for difference mechanism will apply there if we have an all-Ireland market and capacity which is differentially based in terms of existing capacity and ability to roll on existing capacity. Obviously, future new capacity would be available on an all-Ireland basis. Therefore, I find it difficult to understand quite how the mechanisms for contracts for difference would operate in Northern Ireland. I should be grateful if the Minister could get her officials, with the agreement of her Northern Ireland counterparts, to set out how she sees that working. For example, we are now talking about one counterparty but we have a different regulatory system in Ireland. I cannot really see how one counterparty can operate in the Northern Ireland context.
There are issues in relation to interconnection and contracts for difference can be for capacity which is not in GB. You could have wind farms in the Irish midlands or French nuclear power stations involved in the contracts for difference. But I do not think that that is what is meant in terms of using Part 2 to cover the Northern Ireland electricity market. I am not against trying to apply the same principles and I am very much in favour of the precise amendment which relates to the decarbonisation target. However, I feel that the totality of the position in Northern Ireland is much more complicated than simply writing in the Bill that Part 2 extends to Northern Ireland.
No doubt these things are still under discussion between London and Belfast. I suspect that quite a lot of details have to be sorted out and a number of legislative moves have to be made in the Assembly and here. But, given that this is early on in the debate and that we have the opportunity to register it, I register it now and will not repeat it as we go through the rest of the Bill. Perhaps the Minister and her officials could set this out clearly so that by the time we come to Report we understand the totality of the position.
Baroness Verma
My Lords, I am grateful for the noble Lord’s warm welcome of this amendment. I am very keen to make sure that we lay out clearly that this is work in progress. We are working very closely with the Northern Ireland Executive on these provisions to ensure that we cover the differences associated with their single electricity market and that we take account of that. We will continue to work with Ministers in Northern Ireland to ensure that those decisions applying to strike prices in Northern Ireland are on a coherent basis with what we are trying to deliver in the rest of Great Britain.
On the whole, the amendment in the name of the noble Lord, Lord Whitty, is very similar to mine and I am pleased to take on board that he broadly welcomes what we are trying to do. Of course, there will be intense discussions but, in putting these amendments forward, we have a wider picture to fulfil, which is to make sure that what we are doing is UK-based. On that note, I hope that the noble Lord will not move his amendment.
Energy: Tariffs
Debate between Lord Whitty and Baroness Verma
Lord Whitty
To ask Her Majesty’s Government what steps the Department of Energy and Climate Change and OFGEM have taken towards ensuring that energy companies offer their customers the lowest tariff, as announced by the Prime Minister on 17 October (HC Deb, col 316).
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma)
My Lords, the Government published a discussion document on 20 November setting out proposals to deliver the Prime Minister’s commitment to ensure that consumers are on the cheapest tariffs. The Government’s proposals build on Ofgem’s latest retail market review proposals published on 26 October. We are consulting on proposals to legislate in the Energy Bill to ensure that energy companies place consumers on the cheapest tariffs that meet their preferences and have clear, personalised information to help them shop around more easily for the best deals across the market.
Lord Whitty
My Lords, I thank the Minister for that Answer but the Question asked what steps have been taken. She refers to consultation. I have read the Statement, I have read the consultation paper and I have even tried to read the Energy Bill before another place; but the consultation document deals with simplification, it deals with collective buying, it deals with issues such as the companies offering a single tariff—but there is nothing in there to force companies by regulation to offer the lowest rate, which is what the Prime Minister promised. By the way, the Energy Bill as it stands does not really say anything about consumers until Clause 117.
Baroness Verma
My Lords, I remind the noble Lord that at least this Government have taken steps to help consumers who for far too long have not had information which is simple and easy to understand on their bills. The Government are at least taking those proposals forward. Just 15% of households switched last year and that is a really unacceptable percentage. We want to ensure that through the Energy Bill and through our consultations, we are putting the consumer at the heart of what we are doing. I am sure that when the Energy Bill comes to this House the noble Lord will look at it very carefully.
Green Deal Framework (Disclosure, Acknowledgment, Redress etc.) (Amendment) Regulations 2012
Debate between Lord Whitty and Baroness Verma
Lord Whitty
My Lords, I associate myself with my noble friend Lord Grantchester’s questions, which should throw some clarity on this issue, and with the underlying point made by the noble Lord, Lord Moynihan, about energy efficiency in general. Like other colleagues, I strongly support the concept of the Green Deal and wish to see it in operation as rapidly as possible. Now that we have a clear start date, the company is in place and the assessors are coming online, we stand a good chance of being able to start from that date.
The problem for the Government is that the start-up will be relatively slow. It is still not clear to the general public what the Green Deal is about. I think that I am right in saying that the Government are still setting their face against having a public information campaign on the Green Deal, which seems to negate all the good work that the department has done to get all its ducks in a row by this point. If we do not make a real effort—and it will be quite an expensive effort—to tell the public what is on offer, I fear that take-up will be even slower.
That leads me to my central point, which is broader than these regulations. I recognise that they involve some tidying up and corrections, as well as bringing some technologies into play, so I approve of their general direction. What is needed to surround them, though, is, first, a bigger commitment and information and, secondly, frankness about how quickly the Green Deal will not only have an effect on general energy saving and cost saving for householders but, more particularly, have an effect on and be available to the more vulnerable of those consumers.
The interplay between the ECO and the Green Deal is intended to replace CERT and CESP, and is also intended effectively to replace Warm Front. The total number of households covered by those provisions together, even after being run down over the past couple of years, is still close to 200,000. For those groups in fuel poverty, by the old definition at any rate—and I suspect that it will also be true under the new definition—I do not see how the Green Deal is going to replace a figure of that magnitude. When we are considering this, it would be useful to know the Government’s overall assessment of the impact of this on fuel-poor households, and of how far that and other measures will approximate what went before.
Having said that, I approve, broadly speaking, of the regulations and I approve of the Green Deal. However, we have to be clear that we are covering the hiatus period which, even if takes off faster than I am assuming, will cover the next 12 months at least. We also have to be clear on how it affects help to the fuel-poor who, at the moment, are still growing in number by any definition.
Baroness Verma
My Lords, I am grateful for the Committee’s comments and, of course, am glad that it has largely accepted the regulations. Noble Lords opposite are a little too pessimistic. On the one hand, they agree with what we are doing but on the other they are saying that we cannot deliver. I have said very clearly that, first of all, it is always helpful if Governments—be they coalitions or whatever—own up that there has been a mistake. At least I am standing here big enough to be able to do that. I am often disappointed when noble Lords opposite forget that many mistakes were made during their time in government. They have still failed to own up to that. That was just the cheap point that I wanted to get across following the cheap point that was thrown at me. I am always very glad that the noble Lord is optimistic in thinking that they are going to be in government next time. I wait to see that day.
Coming back to some of the questions that noble Lords have raised, I will first respond to the noble Lord on how fuel poverty is being tackled when eligibility is being tightened. The criteria for eco-affordable warmth are being better targeted; they are being targeted on low-income, vulnerable households that are in the greatest need of assistance, including—this time around—the elderly and disabled.
Baroness Verma
My Lords, we will target eligibility criteria for ECO affordable warmth predominantly on private tenure, where concentration of fuel poverty is almost double that found elsewhere. I am sure that noble Lords will agree that we need to ensure that those who require it the most and are least able to afford it should be at the forefront of our schemes.
My noble friend Lord Moynihan asked about the 20% of respondents who did not agree with including the in-use factor. They wanted it to be a changeable rather than a fixed factor, but they did not disagree with the principle.
The noble Lord, Lord Grantchester, asked whether the software was ready. The software tool to be used in people’s homes is fundamentally an issue for the companies providing the Green Deal, but it is important that it be properly tested and approved to ensure that it generates the correct results. I understand that several tools are undergoing a process of technical validation and we expect to see them on the market in the very near future.
The noble Lord, Lord Whitty asked about the impact on fuel-poor households and how expenditure compares with that in previous schemes. Our figures suggest that total fuel poverty spending was £760 million in 2009-10 and will be £828 million in 2014-15, which represents a 9% increase in spending over the period. It will be a more effective way of assisting low-income, vulnerable households than existing schemes because energy suppliers will be incentivised to deliver a package of measures to help households to heat their homes more affordably, rather than just delivering single measures to individual dwellings.
The noble Lord, Lord Grantchester, asked if we were planning to lay regulations amending the Consumer Credit Act. Using the power in Section 30 of the Energy Act 2011, amendments to the framework regulations will be laid to the framework in December. We have laid a revised draft Green Deal code of practice today and recently we published Green Deal provider guidance. If the noble Lord has not had sight of that, I am sure that he will be able to access it.
I have additional information for the noble Lord, Lord Grantchester, on the Consumer Credit Act. It will be for the purpose of dealing with situations where there is more than one debtor under a Green Deal plan, which I think he was quite concerned about. If one bill payer moves on, but the Green Deal has arrears, there will be a format for us to ensure that we can respond.
The noble Lord, Lord Grantchester, also asked how the ECO subsidy would interact with the Green Deal because of the golden rule. There will be occasions when it will not be possible under the golden rule to cover the full cost of installations of more expensive measures. Therefore, the ECO subsidy will work with Green Deal finance for these measures and will take it into account when calculating the Green Deal finance package for the household.
The noble Lord, Lord Grantchester, asked several more questions and I hope that I will be able to answer most of them. If I do not, I will ensure that the noble Lord is written to. He asked how the Green Investment Bank would underwrite the Green Deal and how that would work. I may suggest to him that this is a negotiation process between the Green Deal Finance Company and the Green Investment Bank. It is an agreed priority for the Green Investment Bank, but these are commercially confidential negotiations, and they are ongoing. I cannot comment further on them.
The noble Lord, Lord Whitty, said that no one really knows about the Green Deal. We have been working closely with local authorities and consumer groups but until we are able to offer the Green Deal, which will go out in January, we do not want to raise the expectations of people and then tell them to wait. We have worked closely to ensure that all the processes we need to ensure that the Green Deal is kick-started in a very progressive, productive way in January are in place. That work has been going on for several months.
I urge the noble Lord, Lord Whitty, to be less pessimistic about the response that we are going to get to the Green Deal. I assure him that many of us, particularly Ministers, have been to a number of events to raise the profile of the Green Deal. In October, it was kick-started when people could sign up to become suppliers, assessors and providers, but the programme will not start until January 2013. The noble Lord needs to sit and wait, and to watch this space. However, I urge him to be optimistic that people will benefit hugely from the Green Deal and that we are working very well and very closely.
Lord Whitty
My Lords, I am prepared to agree with the noble Baroness that everything is being put in place, and you could not expect and would not want a huge take-up right at the beginning. My point was that, because all the other schemes will have finished by 28 January, there will be a hiatus between that and Green Deal reaching its forward drive path, if everything goes well—I certainly wish it well. Therefore, in 2013 we will see a dip in the number of households treated, particularly in relation to fuel poverty. It may well be that by 2014, if all goes well, the situation will have improved. However, for the next year and a half, the Green Deal uptake, and in particular the uptake by the fuel-poor, who are heavily concentrated in the private rented sector, which is the most difficult to address and where there are most reservations among both landlords and tenants, will not be that fast. I am not complaining about that; I am just saying that there will be a big problem over the next 18 months in the achievement of energy efficiency and fuel poverty targets.
Baroness Verma
Perhaps I may reassure the noble Lord that we have looked at those factors. People on the current schemes will remain on them and will be protected until the Green Deal takes over. Unless I am corrected by officials, the noble Lord can feel reassured that there will not be the hiatus that he assumes. If I do not receive inspiration immediately, I will write to the noble Lord—but I see that inspiration is on its way. The Warm Front will continue until March 2013.