Energy Bill

Lord Judd Excerpts

Tuesday 19th November 2013 Lords Chamber

Moved by

[Lord Judd]

5: Clause 131, page 101, line 5, at end insert—
“( ) how the Authority shall incorporate social and environmental factors in carrying out its functions.”

[Lord Judd (Lab)]

My Lords, in moving this amendment I remind the House that I am involved in a voluntary capacity in a number of NGOs concerned with the environment.

On Report, the Minister said that energy production and consumption should be sustainable. I remind the House of an important point made by my noble friend Lady Worthington, that we face a “quadlemma” in which we must tackle climate change, keep bills affordable and keep the lights on without sacrificing social and environmental standards in the process. It is very much in the spirit of this observation that I am pursuing this amendment.

On Report, the Minister helpfully reminded us that Ofgem has social and environmental duties and can consider sustainability when carrying out impact assessments for particular schemes. She also informed us that in future Ofgem’s forward planning must show how it will implement the new strategy and policy statement and that it must report annually on how it is contributing to the delivery of the Government’s policy outcomes. The Minister further explained that the Bill seeks to remove social and environmental guidance provision because it has,

“not achieved coherence between the Government’s energy strategy and the regulatory regime”.—[Official Report, 6/11/13; col. 263.]

She explained that it would be replaced by a strategy and policy statement setting out the Government’s strategic priorities. She emphasised that Ofgem must have regard to strategic priorities and carry out its functions in the way that it considers best calculated to deliver the policy outcomes, and argued that this would be a stronger obligation on Ofgem than existed in current guidance.

The Minister undertook to write a letter to me and place a copy in the Library of the House setting out precisely how the Government will satisfy themselves that Ofgem will pay due regard to the effect on the environment of activity connected with the conveyance of gas through pipes or the generation, transmission and distribution of supply of electricity, including what measures, benchmarks and associated matters will be taken into account and used in establishing those benchmarks. The Minister has indeed written to me and the letter is in the Library, and I am grateful for the detailed advice about Ofgem’s various duties and responsibilities. However, I am afraid that her letter failed to establish how social and environmental safeguards would be implemented, not weakened, by the Bill.

We seem to be in a circular argument. As I explained in some detail on Report, the strategic priorities set out in the Ofgem policy statement are functions to which the principal objective and general duty is applied. This duty is to be found in Section 4AA of the Gas Act 1986, with equivalent provisions in the Electricity Act 1989. These provisions make it clear that the principal objective is to protect the interests of existing and future customers of electricity and, wherever appropriate, to promote competition. They are not about social and environmental considerations.

Furthermore, the Bill has been set out in such a way that, should the Secretary of State decide to issue social and environmental guidance in future, it would be subordinate to Ofgem’s commercial responsibilities. I have taken into account counsel’s advice that the reality will be that if the Bill is enacted as the Government propose, the explicit responsibility to issue social and environmental guidance will disappear. There is nothing in the Minister’s letter that indicates how it will be replaced. To be crystal clear about this, it is not a requirement that the strategy and policy statement should cover social and environmental issues, which it should if the present level of protection is not to be significantly weakened. My own views remain unchanged: Ofgem’s social and environmental responsibilities will be weakened by this legislation. If that is not the Government’s intention, there should be a clear statement in the Bill that the Secretary of State will indeed provide social and environmental guidance to the regulator in the strategy and policy statement. This small amendment would achieve that.

Even at this stage, I ask the Government to think very carefully about this and ask themselves: where is the vision? What does the word “sustainability” really mean? What sort of environment do we want to be living in, in future? What of the incalculable psychological and emotional value of landscape and its contribution to national well-being? If the Government recognise the quadlemma to which my noble friend referred and wish to address it, what are they actually doing to avoid the gradual destruction of the natural environment in their pursuit of energy goals? If current policy is anything to go by—it all seems to be about streamlining development—the answer seems to be not a lot. In short, it seems to be the Government’s express intent to remove environmental safeguards in the quest for growth. I beg to move.

[Viscount Ridley (Con)]

My Lords, I support the noble Lord, Lord Judd, in his amendment. I declare my interests as listed in the register.

I have only one minor correction to make. It is very important to draw attention to the fourth leg of the quadlemma, but we should really be calling it a tetralemma if we are going to be consistent in Greek. It is important that the concerns that the noble Lord has raised, which are vital to communities all over the country, about the desecration of landscapes that is being visited on them should be taken seriously. I look forward very much to what I hope will be a reassuring reply from the Minister.

--- Later in debate ---

[Baroness Verma]

My Lords, I thank the noble Lord, Lord Judd, for his amendment and for raising the matter of Ofgem’s social and environmental duties. I recognise the importance that the noble Lord and others attach to this. It is recognised in primary legislation, which sets out Ofgem’s duties, including those concerned with environmental sustainability and social issues. The noble Lord will be aware that Ofgem has other duties, including its principal objective to protect consumer interests, including their interest in a reduction of greenhouse gases and security of supply, as well as duties to promote efficiency and economy and the need to ensure that energy businesses are able to finance their activities.

The Government recognise that Ofgem’s role to a large extent is concerned with identifying what is an appropriate balance between all of those different objectives. This is a case of an independent economic regulator. The Government’s principles of economic regulation state that,

“regulatory decisions are taken by the body that has the legitimacy, expertise and capability to arbitrate between the required trade-offs”.

In the case of energy, that body is, of course, Ofgem.

We are introducing the strategy and policy statement as a result of the Ofgem review, which concluded that this was necessary to provide more coherence between the Government’s strategic energy priorities and the way Ofgem regulates the energy sector. It is crucial, however, that the statement should not undermine independent regulation. The review also concluded that Ofgem should remain responsible for the consideration of trade-offs between economic goals and broader goals, including social and environmental matters. That is why Ofgem will now have additional duties to take into account the contents of the statement when carrying out its own regulatory functions, which will stand alongside its existing duties. As before, Ofgem will be expected to continue to achieve the appropriate balances between its objectives.

The strategy and policy statement will set out the Government’s strategic policy and identify policy outcomes which are relevant to what Ofgem should achieve, but it will not specify how Ofgem should act to achieve these outcomes or specify outcomes in a way that would compromise Ofgem’s independence. It is not necessary to restate Ofgem’s objectives within the strategy and policy statement and it would not be appropriate to include text which could be seen as directing Ofgem on how it should interpret its duties.

I repeat my previous reassurances that we will take social and environmental matters into account when we draft the strategy and policy statement and that there will be opportunities for interested parties to comment on its contents when we consult next year. Both Houses will be able to consider the contents of the statement before it is designated.

My noble friend Lord Jenkin raised the role of the Environment Agency. Ofgem is a regulator of the energy sector and the strategy and policy statement is aimed at achieving coherence between government energy policy and regulatory actions. It is not aimed at doing the work of the Environment Agency which, as my noble friend rightly said, is a duty on that agency.

However, the noble Lord, Lord Judd, and others have raised important points about visual amenity and other environmental concerns. Existing planning and environmental habitat legislation are operating in tandem with national policy guidance on planning matters. This provides the framework to ensure that this is done, and done properly. Environmental impacts are considered at all stages of the planning process, from the development of proposals by applicants, including, for example, through preparation of environmental statements, to consideration by the Planning Inspectorate and final determination and assessment by the Secretary of State. Environmental considerations are also taken into account when government are taking policy-making processes. Key guidance on considering planning for nationally significant infrastructure projects is contained in the national policy statements.

There is a lot already out there for Governments to utilise so, given all those reassurances, I hope that the noble Lord, Lord Judd, feels better reassured and will therefore withdraw his amendment.

[Lord Judd]

My Lords, as I have said before, I have no doubts whatever about the Minister’s good will. What I am concerned about is the muscle that will ensure the objectives for which I have been arguing. I listened carefully to the words of the Minister. I am of course an optimist by nature and I hope that what she said will lead to the right conclusions. I would, however, be misleading the House if I did not say that I have a profound sense of foreboding of another grim slide downwards in the character and quality of our countryside. This really is a profoundly serious issue. We shall see what happens but I hope I am allowed to say that I am absolutely confident that if this Government fail to reverse the trend, it will be reversed by the future Labour Government who, after all, will be the heirs to all that fine and imaginative legislation between 1945 and 1951 which enshrined the importance of the countryside in our national profile. I beg leave to withdraw the amendment.

Amendment 5 withdrawn.