David Mowat
Main Page: David Mowat (Conservative - Warrington South)
David Mowat (Warrington South) (Con)
The Minister has referred several times in the last few minutes to CCS technology. What is his core estimate of that being deployable on a commercial basis in the UK?
Michael Fallon
I am not able at the moment to give my hon. Friend a precise timetable. Last year, we had a competition, as he will recall, for CCS. We selected the two principal bids and we are continuing to negotiate, but as soon as I have more news on that, I will ensure that he is one of the first to hear.
I must thank the hon. Member for Brent North for amendment 149. He will see that the small error has already been corrected in the version of the Bill that was introduced to the House on 9 May.
My hon. Friends the Members for Daventry and for Waveney (Peter Aldous) have tabled a number of amendments to clause 41 covering the certificate purchase scheme, which is designed to replace the renewables obligation for the last 10 years of its existence. First, let me reassure my hon. Friend the Member for Waveney that the provisions he seeks to remove through amendments 153, 154 and 157 to 159 simply replicate legislation that exists under the renewables obligation. Caps have been set before, such as for bioliquids; exemptions already exist for very small suppliers; and costs of administering the scheme are already recovered from the RO buy-out funds. The powers he wants to remove through amendment 159 would, for example, be needed to revoke any incorrectly issued certificates. These provisions therefore ensure the continued effective operation of the scheme.
On amendments 155 and 156, requiring the immediate recovery of shortfalls in the levy from suppliers would be unnecessarily prescriptive. That may not be necessary if, for instance, the shortfall is very small and can be made up in the next round of regular levy payments.
Amendments 160, 161, 167 and 168 would either remove our ability to change future support levels for the scheme, or add further validation requirements on the underpinning evidence for a change. Although the Government do not intend to make banding changes under the certificate purchase scheme, I would not want to remove our ability to do so. As we have seen, where there is compelling new evidence to change support levels, such as to protect consumers, it is important that the Government can act, and these provisions are important as they set out the controls on any such change.
On the underpinning evidence, we already take a rigorous approach to the assessment of costs and income in banding reviews under the renewables obligation. I can assure the House that we would do so again in any review of support levels under the certificate purchase scheme.
Let me reassure my hon. Friend the Member for Daventry that, in relation to amendment 169, consumer costs will always be an important consideration in banding reviews. New section 32V(4)(e) in clause 41 makes specific provision for that.
That brings me to the last but most important issue in this group: the costs and benefits of electricity market reform to consumers. A number of amendments have been tabled by my hon. Friends the Members for Daventry, for Waveney, for Gainsborough (Mr Leigh) and for Christchurch (Mr Chope), and we must thank the last two of them for providing such excellent chairmanship of the Bill Committee.
First and foremost, let me be clear that electricity market reform—EMR—is good for the consumer. Gas prices are rising and are projected to carry on rising. We need to move to a more diverse energy mix, which breaks our dependency on both gas and fossil fuel generation. The contract for difference provides protection for consumers by ensuring that generators pay back when the market price goes over the strike price, and the price certainty it brings will reduce the cost of financing new power stations, and thus reduce costs to the consumer. EMR also serves the public interest by reducing carbon emissions and ensuring everyone can benefit from reliable electricity supplies. These are important matters, which is why I would not want to accept amendment 162 and make them subordinate matters when the Secretary of State is exercising functions under part 2 of the Bill.
On amendment 151, I would not expect use of the liquidity powers in clause 38 to increase costs for consumers over the lifetime of any intervention. The purpose of these powers is to protect consumers by driving competition and reducing prices. A positive outcome for consumers must be proven before action is taken, and that would be shown through an impact assessment, which would be published when consulting on any proposed use of these powers. On amendment 152, contracts for difference can only be for the purpose of encouraging low-carbon generation, so that change is not necessary.
Both today and tomorrow, we need to work in the best interests of consumers and ensure that energy is cheaper as well as greener. I hope that all Members on both sides of the House can see that EMR represents the cheapest way of securing a diverse, low-carbon and reliable energy mix.
I want finally to turn to the amendments involving tariffs and to speak to the relatively minor Government amendments in that group before addressing the amendments tabled by the hon. Member for Angus. In line with the Prime Minister’s crucial commitment to ensure that people are on the cheapest tariff for their preferences, Government amendments 119 to 133 will align the powers in clause 121 more closely with Ofgem’s retail market review proposals. Government amendments 119, 120, 122 and 123 further clarify that those powers cannot be used for the purpose of imposing price controls by limiting the powers of the Secretary of State to make provisions under clause 121 only to the list set out in subsection (3).
In line with Ofgem’s retail market review proposals, Government amendments 125, 127, 128 and 131 will restrict the power to move customers from one tariff to another only to those customers on tariffs closed to new joiners. Government amendment 126 ensures that suppliers will have at least one core tariff slot that is not prescribed. Government amendment 130 clarifies that the power to prescribe that a supplier offers fixed or variable rate tariffs does not equate to setting the price or term for the tariff. Finally, Government amendments 121, 124, 129, 132 and 133 reword a number of the definitions to ensure that the powers can be exercised in the context of existing requirements placed on suppliers as a condition of their supply licence.
Amendments 21 and 22 were tabled by the hon. Member for Angus and address concerns he raised in Committee. Amendment 21 relates to the proposed Secretary of State power set out in clause 121 to move consumers off poor-value dead tariffs. His amendment would leave the only basis on which people can be moved off poor-value dead tariffs as an opt-out for consumers. Moving customers off such tariffs is a key part of meeting the Prime Minister’s commitment on energy bills. I would like to reassure hon. Members that in the event that Ofgem’s reforms are unduly delayed, we fully intend to make use of the opt-out approach rather than an opt-in. As a result of Ofgem’s review, however, it could become clear that there are certain circumstances in which some consumers could be actively disadvantaged by an opt-out approach, so we consider it prudent to retain the option to pursue an opt-in approach if necessary. Consumers could be disadvantaged should it, for example, transpire that as a result of market changes they would actually be better off staying on specific closed tariffs or that taking an opt-out option means they face contractual difficulties, such as a breach of contract.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
I welcome the Minister to his first parliamentary interaction with the Bill. His predecessor, the right hon. Member for South Holland and The Deepings (Mr Hayes), took the Bill through Committee and we know from our experience today that the Minister can speak—although perhaps in slightly less florid language—for at least as long as his predecessor could on such matters.
A range of issues are covered by this group of amendments, and I am conscious that many Members want to speak about their amendments. I shall do my best to be as brief as possible, but I want to mention a few points both in response to the Minister’s speech and in support of some of the amendments tabled by me and my right hon. and hon. Friends.
I welcome Government amendment 66, which will put in place a five-year review of the emissions performance standard. That is very important. I am sure that my hon. Friend the Member for Brent North (Barry Gardiner) will try to catch your eye, Mr Deputy Speaker, to speak in support of his amendment 150. I hope that the Minister will take that seriously in the context of the length of the grandfathering period—gas investors suggest that their investment is usually over 30 years rather than 45—and give it a degree of consideration.
In relation to the EPS, let me say a few words about amendment 179 on carbon capture and storage. The provisions in chapter 8 on the EPS will have a significant impact on the future development of CCS. The Opposition have consistently and clearly set out our support for developing that technology, which we believe has a vital role to play in our future energy mix alongside other low-carbon technologies. We do not need to go over the same ground again, but I probably first raised with the Minister’s predecessor but one some of the issues about the £1 billion that was supposedly available for capital funding. We know what the Cabinet Office document said was available for this comprehensive spending review period, although I am conscious that the Minister’s Department—or one of his Departments, the Department of Energy and Climate Change—seems to have secured its negotiations with the Treasury on the CSR. I wonder whether the remainder of that £1 billion is part of the savings that have been offered up.
If we do not get the technology developed for CCS, we will face a significant gap in our ability properly to deal with the peaks in our generation requirements. That is why we tabled amendment 179. As the hon. Member for Warrington South (David Mowat) perhaps suggested in his intervention about carbon capture and storage, we are conscious that there have been bumps in the road in moving that technology towards commercial development; I think it is fair to put it in those terms. We are concerned, as are a number of industry bodies, that an unintended consequence of the Bill is that it makes that technology less likely to be developed.
The Minister was right to say that the exemption was in the draft Bill, but was taken out as a result of concerns, expressed by the Select Committee on Energy and Climate Change and others, that it could be a loophole allowing unabated coal generation. The way in which the amendment is framed—it relates to a specific commissioning period—helps to address that sensibly, and to ensure that CCS is given the best chance of developing and being part of the future-generation mix, as many of us wish it to be. I therefore intend to push amendment 179 to a Division.
There are a number of amendments relating to contracts for difference. I am sure that the hon. Member for Brighton, Pavilion (Caroline Lucas) and others will seek to speak to some of them. I wanted to say a word on new schedule 1 and new clause 5, which stand in the name of the hon. Member for Cheltenham (Martin Horwood) and a number of other Members from across the House, on establishing a panel of independent experts to offer advice and guidance to the Government before they enter into a CFD. Although the Minister was not on the Committee, I am sure that he is familiar with the tenor of our debates on the subject; we tabled a number of similar amendments in Committee, and argued strongly for an independent expert panel to offer transparency, expertise and, crucially, protection for consumers. That differs from the Government’s plan to set up a non-statutory panel, and would deal with the concerns that the non-statutory proposals do not go far enough.
I am sure that the Minister will be aware that in Committee we argued that for many people this is still a controversial issue. The best way to ensure confidence in the negotiations that are under way—I think I heard the Minister refer to “when”, rather than “if”, the contract is secured; I am not sure whether that was a Freudian slip—is to ensure transparency around the process. Having that panel is a sensible way of providing scrutiny and transparency. If those Members who tabled the amendment seek to push it to a Division, they will have the support of Labour Members.
On a related issue, amendments 8 and 9, which are in my name and the name of my right hon. Friend the Member for Don Valley (Caroline Flint) and my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), push the Government to be more transparent about agreements with generators through investment contracts. It would be churlish of me not to recognise that the Government have moved on the issue since Committee, and have listened to what the Opposition said in Committee about what information could be restricted. I listened carefully to what the Minister said about the information that is not made available being described. However, I am unconvinced that that goes as far as it could or should. I take the point that it may be appropriate for certain information not to be put in the public domain, particularly when we are dealing with nuclear energy, but that should be the very limited exception, rather than the rule. That is why amendments 8 and 9 make it clear that the exception will be for “trade secrets”, rather than “confidential information”, as the Government could decide what was, or was not, confidential. That is important for transparency and confidence.
The Minister will be aware that the representative of EDF Energy who gave evidence at the start of Committee proceedings was very clear about the importance of transparency. It would be slightly odd if the Government sought to restrict that transparency. We will never have the confidence that we should have in nuclear as part of our generation mix if people are able to gainsay aspects of agreements between the Government and companies. The best way of ensuring that that does not happen is to make all the information available; people can then make their judgments. I am sure that that would not stop some Members from being against nuclear power, but it would give a number of others—and, more importantly, people more widely—confidence that nuclear should continue to be part of our generation mix.
David Mowat
I have listened carefully to what the hon. Gentleman said about the need for an expert panel, and all that that implies. Is it the position of the Opposition Front Benchers that the Government should not be able to enter into a binding contract with EDF, after negotiating with it in good faith, without that coming back to Parliament?
Tom Greatrex
I understand, from what the Minister said, and what his predecessor said in Committee, that the agreed contract will come before Parliament, and I would expect that to happen, but an expert panel that included consumer representatives could help to bring a degree of rigour and transparency that will be important in ensuring that there is confidence if—or when, to use the Minister’s term—an agreement is reached.
David Mowat
Does the hon. Gentleman envisage the Government coming to an agreement with EDF that is subject to ratification by some panel? Would he expect EDF to negotiate on that basis?
Tom Greatrex
I expect that EDF would want the Government to be sure that the agreement that they were entering into was safe and sound, and conformed to the best possible degree of scrutiny. An expert panel could bring some of that scrutiny, rigour and analysis. That is, in the end, in the interests of not just the Government and EDF or any other company, but the whole energy sector. That is an important point that we pushed in Committee and will continue to push today.
Chris Heaton-Harris
I dare not say a word about small businesses in the presence of my hon. Friend, the champion of small business in the House. When I used to run my own small business, the power bill was one of the biggest items that could not be avoided, and the Bill will increase that.
The Bill does not help with the core concerns of many in the House about fuel poverty. Reliable estimates of fuel poverty are difficult to come by because the Department has been hedging its bets on publishing any detail. The latest estimates are for 2010 when 3.5 million households in England and 4.75 million across the UK were thought to be in fuel poverty, based on the 2012 poverty statistics released by DECC. The latest dataset used by the House of Commons Library to estimate the impact of changes to prices is for 2009. This suggests that the increased cost of electricity due to the renewables obligation alone may have pushed 100,000 households into fuel poverty. We should be very aware what we are doing when we increase the cost to consumers of their energy. It powers everything from broadband to their heating, and many other things essential to the country’s development, and we should be very aware about how it works.
David Mowat
I accept the thrust of what my hon. Friend says on matters such as fuel poverty, but I rise to defend the Bill a little. Does he accept that we have to cut carbon? If so, does he accept that the way set out in the Bill is a path forward towards that?
Chris Heaton-Harris
Yes, I accept that we need to be aware of our carbon emissions, and I actually think that being responsible for the environment and trying to deliver the best for it is a Conservative principle. The Bill has some good elements to it, but the centralisation that I mentioned and the increased costs to consumers, businesses and the like are outcomes that we should think more about. I will happily leave my contribution there so that other Members can speak.
Martin Horwood
Perhaps courses in negotiating skills might be recommended for members of the Department of Energy and Climate Change on that front. To be fair, Ministers have made it clear that they do not intend to sign the contract with EDF at any price, but the difficulty is that we in Parliament simply do not know that there has not been adequate scrutiny.
Martin Horwood
I think Madam Deputy Speaker will catch me with her rather steely eye if I give way too many times, so I will move on.
In the UK, the nuclear industry is not very competitive and is overwhelmingly dominated by one nationalised industry supplier—Electricité de France. There are risks that we are in effect organising a massive transfer of funds from British bill payers, if not taxpayers, to a French nationalised industry of dubious profitability. The scale of that possible subsidy has been underlined by former Friends of the Earth directors, including Tom Burke who said:
“At a strike price of £100/MW and a 30-year contract life this would require a subsidy of £1 billion/year above today’s wholesale price for electricity. This would lead to a transfer of £30 billion to EDF from Britain’s householders and businesses. Should the whole of the 16GW of new nuclear anticipated by the Energy Minister be financed on similar terms it would cost householders and businesses £150 billion by 2050.”
That is an enormous commitment that we must scrutinise and ensure that value for money is inserted into the process.
David Mowat
Specifically on that point, the hon. Gentleman says that a strike price of 10 is unacceptable. Would he extend that to offshore wind?
Martin Horwood
I did not say 10, I said 100, and figures as high as 165 have been discussed and contract times as long as 40 years speculated about. The Minister has been unable to reassure us about that in the debate. It is true that high prices are talked about for offshore wind, but that is an emerging and quite competitive technology that deserves support. It is not a 56-year-old technology that has already proved to have a massive record of cost and time overruns. I am happy with supporting offshore wind but unhappy with supporting nuclear.
The effect of new clause 5 and a panel of expert scrutiny would be to ensure that all technologies negotiating contracts for difference were subject to scrutiny, including offshore wind and other renewables. New clause 5 and new schedule 1 are not specifically anti-nuclear, but they are anti-unearned subsidies. The Energy and Climate Change Committee called for that in its report, and Which? addressed it in the drafting of these provisions—I am grateful for that. Such scrutiny and transparency are particularly relevant when, as the Committee pointed out, a mature technology dominated by a single large supplier means there is little competitive pressure and the strike price naturally tends to rise in such a situation—even more so, as the hon. Member for Rochester and Strood (Mark Reckless) pointed out, if one side has almost conceded that it needs to sign the contract at the end of the process.
Alternatives have been discussed, such as scrutiny by the National Audit Office and others, and in a parliamentary debate some months ago it was suggested that the Public Accounts Committee play a role in this kind of scrutiny. The problem with all these suggestions, however, is that they investigate after the event. As I said in my intervention on the Minister, if we are talking about a contract of 20 or 30 years, it is practically useless to investigate whether it is good value after the event because we are locked into it for a whole generation. Right now, negotiations are under way with EDF for this contract.
New clause 5 and new schedule 1 would establish an independent expert panel, which would differ from the expert panel that the Government have already established. As the affordable energy campaign by Which? pointed out:
“A panel of technical experts has been established by the Government to scrutinise the evidence National Grid presents for the setting of CfD strike prices. However this panel does not have a sufficiently broad role. For example, it does not have value for money as part of its remit. The panel must have a clearly defined oversight role set out in the Bill”.
If the Government support the concept of an expert panel, why on earth can they not put it in the Bill, as defined in new clause 5 and new schedule 1? I would have thought they would have absolutely nothing to fear from that.
New clause 5 and new schedule 1 are in the same spirit as amendment 162, although I do not buy everything the hon. Member for Daventry said in support of his proposals. However, energy bills are a major cause for concern among consumers—all hon. Members know that. Whether we are proposing renewables or nuclear, a strong case needs to be made, and transparency and accountability need to be at the forefront. Consumers need a good deal as well as a green deal. The Bill does not guarantee to deliver that, which is why I shall press new clause 5 to a Division.