Energy Bill

Lord Astor of Hever Excerpts

Tuesday 9th July 2013 Grand Committee

[Lord Grantchester]

The Government are not providing any further information other than that further work is under way to update the initial value-for-money analysis undertaken last year and that Defence Ministers will be asked to decide whether to invite bids for the GPSS on the basis of that work. I welcome the presence of the Defence Minister to provide clarity to the Committee.

Given that this Bill will have completed its passage through Parliament by that stage, will the Minister tell the Committee today by what means Parliament will be able to assess the analysis and ask for certainties beyond the bland assurances already provided by the Minister of State in the other place, Mr Greg Barker, to my honourable friend Luciana Berger? It is recognised that a sale contract would be a private matter and not wholly for Parliament. No doubt the Public Accounts Committee may also scrutinise any sale. However, nothing in the clause deals with the contractual nature or goes beyond any theoretical possibility. Will the Government explain why they want to sell and whether they may limit the sale or lease to the use of the pipeline and retain the fabric or even vice versa? Any transfer would want to pass over as many liabilities as possible while retaining as many benefits. Is there any comfort in Clause 113 providing that it must be for valuable consideration? I presume that the Minister can qualify this as positive valuable consideration and will exclude negative valuable consideration—that is, someone is paid to take it away or it is part of a larger transaction as an uncosted supplement. Will the Minister also clarify what conditions the Government consider appropriate when asking this Committee to acquiesce to this power?

Finally, the Minister might be tempted to say that the Government do not yet know all the appropriate conditionality pertaining to any transfer. Will the noble Lord look at the suggestion by my noble friend Lord O’Neill and come forward with an amendment to bring regulation to the situation or to introduce any sale or transfer to Parliament when there is clarity around the circumstances which the Minister is happy to explain and promote when the time comes?

[The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)]

My Lords, to date the clauses that are included within this Bill to enable the sale of the Government pipeline and storage system have received relatively little attention. Indeed, they were barely mentioned on Second Reading. This is why I welcome the clause stand part debate tabled by the noble Viscount, Lord Hanworth, as it provides an opportunity for us properly to scrutinise the proposals.

Clause 113 is crucial because it allows for the sale or lease of the GPSS or a part of it. At the current time, the rights to operate and maintain the GPSS and to access land for this purpose are personal to the Secretary of State for Defence. This clause allows the Secretary of State for Defence to transfer these rights, thereby enabling the system to be sold or leased. A decision on sale or lease will be made once further analysis has been undertaken and we have engaged with the market. The clause also allows the transfer of liabilities.

Having explained the intent of this clause, I would like to address a number of concerns that were raised in the other place relating to the sale of the GPSS so that I may demonstrate what progress has been made in these matters.

First, the strategic importance of the GPSS was raised, including the need for it to provide assured fuel supply to certain sites. Through the work conducted to date, we are confident that we will be able to put a contract in place to meet the continuing requirements of the Ministry of Defence and the United States visiting forces, which will offer the appropriate level of protection, including priority access when necessary. Similarly, the potential impact of sale on commercial customers has been raised. The Department of Energy and Climate Change and the Department for Transport have jointly reviewed the implications of a sale of the GPSS on the market, including access and charging, and concluded that while it transports a significant proportion of fuel to the major airports, existing regulatory provisions, particularly the Pipe-Lines Act 1962, are sufficient and no further regulation is required.

On physical security, I reassure noble Lords that we do not believe that the sale will make the GPSS any more vulnerable to terrorist attack than other equivalent infrastructure operated by the private sector, such as the electricity and gas distribution networks, particularly since the pipeline and storage tanks are predominantly built underground to make the system less vulnerable. Officials at the Oil and Pipelines Agency regularly discuss, with appropriate external organisations, measures to best protect the GPSS, including from the risk of cyberattack. We would expect a purchaser to continue these measures post-sale.

Questions were also raised regarding the impact on safety and the environment following the sale of the GPSS. Any owner has an inherent interest in running the system in a safe manner and would need to comply with the same legislation and regulations as the Oil and Pipelines Agency does at present, such as the regulations under the Environmental Protection Act 1990 and the Pipelines Safety Regulations 1996. Therefore, it is not believed that a sale would have any adverse impact in these areas.

Lastly, and quite rightly, the value for money of a sale has been raised. A final decision on sale is dependent on being able to strike the right deal with the private sector, and value for money is a key consideration. Work is ongoing to update the initial value-for-money analysis that was undertaken in 2011 and which underpinned the impact assessment published alongside these clauses. To refine these financial figures, we have appointed external advisers to undertake a forensic examination of the GPSS costs and revenues, including any potential liabilities associated with the ongoing operation of the system. This work will inform a final decision on sale, which we aim to make by the end of this year.

I shall do my best to answer any concerns or questions that were asked. The noble Viscount, Lord Hanworth, and the noble Lord, Lord O’Neill, were concerned that the GPSS would be seen as a monopoly. The GPSS does not supply Heathrow, Gatwick and Manchester directly—this is done via third-party pipelines. The GPSS provides direct to Stansted, and the DECC and DfT have looked at regulation and concluded that none is required. The GPSS has to compete with other privately owned pipelines.

The noble Viscount was concerned at the foreign ownership issue. Any buyer would need to be deemed competent to operate the GPSS in a safe manner and to be a UK-registered company. We are considering what other criteria any purchaser would need to meet, including restrictions on foreign ownership, and the options for posing these restrictions before any onward sale.

The noble Viscount and the noble Lord, Lord O’Neill, asked whether there would be any regulation of the GPSS post-sale to protect customers. The DECC and DfT have reviewed the implications of the GPSS sale on the market, including access and charging, and concluded that, while it transports a significant proportion of fuel to major airports, existing regulatory provisions, particular under the Pipe-Lines Act 1962, are sufficient and no further regulation is required.

The noble Lord, Lord O’Neill, was concerned that the sale might adversely impact on safety and the environment. Any owner has an inherent interest in running the system safely and there is no reason to believe that the sale will adversely impact on safety. Indeed, the OPA already has to comply with a number of safety regimes such as the Health and Safety at Work Act 1974, the Control of Major Accident Hazards Regulations 1999, regulations under the Environmental Protection Act 1990 and the Pipelines Safety Regulations 1996, which are overseen by the Health and Safety Executive and the Environment Agency. This will not change.

[Lord O'Neill of Clackmannan]

The Minister referred to a number of regulatory bodies on health, safety, the environment and so on. I was actually asking primarily about economic regulation. Can he flesh out rather more the information he has given us on the nature of the other competitors that the pipeline would be matched against to supply the relevant airports? Can he say whether these pipelines are subject to any kind of economic regulation, probably by Ofgem?

[Lord Astor of Hever]

My Lords, I hope to come back with a suitable answer quickly. In fact, I will write to the noble Lord on this issue.

The noble Lord, Lord Grantchester, was concerned that there are no additional clauses on conditionality. Clause 114 makes provision to modify the application of certain provisions of the Pipe-Lines Act 1962 to the GPSS, so that the GPSS, as far as possible, is treated post-sale as if it were a pipeline to which that Act applied. This is to ensure that it has neither a competitive advantage nor disadvantage to other such pipelines. Any conditions on sale will be contractual.

Finally, the noble Lord, Lord Grantchester, was concerned that there might be a conflict on the value consideration. We expect value to be positive.

I hope that apart from the one issue on which I will write to the noble Lord, Lord O’Neill, I have answered all noble Lords’ questions and concerns. I thank my noble friends Lord Howell and Lord Jenkin for their support.

Clause 113 agreed.