Energy Bill

Lord Roper Excerpts

Monday 28th October 2013 Lords Chamber

The biggest difficulty is that not one of the six has suggested that this is the moment to get new customers by not putting their prices up. They have all merely said, “everyone else is putting their prices up, so we’ll put them up as well”. That suggests we do not have quite the competitiveness that we want. The Prime Minister has made that point and the Opposition feel it too, so we should consider this as a very real issue in a way that does not just encourage another few big or even medium-sized companies. I want to see a world in which it is much more likely that people come into the industry because it is at that level of innovation that you really get the competition that in the end leads to lower prices.

[Lord Roper (LD)]

The noble Lord, Lord Broers, and my noble friend Lord Deben have widened the amendment tabled by my noble friend Lord Jenkin to other, rather important issues on competition in the course of this Bill. Although it may take us a little time to get from six to 60, or even 600, this amendment is important because of the immediate impact upon independent generators when the capacity mechanism comes into operation next year.

As my noble friend Lord Jenkin points out, the Bill and the proposed rules for the capacity market would make it virtually impossible for independent generators to raise project finance and compete with the big six. My noble friends Lords Jenkin and the noble Lords, Lord Cameron of Dillington and Lord Berkeley, have talked to a number of them and they really do not see how they would do it. We have also talked to their bankers and they do not see how this would be possible for independent generators. That is why it is very important that the regulations and other provisions for the capacity market are drawn up in a way that is fair to smaller generators.

As my noble friend Lord Jenkin has said, we would obviously prefer it if the Minister were able to accept these amendments today. However, there may well be technical problems with them, so we hope that if she were not able to accept them today, she would be able to give us some indication that she will bring back something covering this ground at Third Reading.

[Lord Cameron of Dillington (CB)]

My Lords, as this is my first intervention on Report, I must declare an interest as a farmer with a renewable scheme on my land.

Most of what needs to be said in favour of these amendments concerning competition has already been said and as a co-signatory I very much support them. However, I want to underline the fundamental point involved. It has become obvious to anyone reading newspapers in recent months that the electricity industry needs a huge amount of investment. In Europe it amounts to trillions of euros, and in the UK it is hundreds of billions of pounds. This investment is needed for generation, transmission, distribution and supply. If we do not have that investment, to believe some of our journalistic forecasters, we are likely to get power cuts with all the economic and social tragedies which that might involve. This investment cannot be provided by the government. It has to be provided by the private sector; that is, you and me or, rather, our pension funds in most cases.

The other issue on which anyone reading our newspapers in recent days and weeks will have come to a conclusion is that the oligopoly of the big six is not the political flavour of the month. While being aware that the root of the problem is the rise in the price of gas—I was going to say feedstock—there is something to be said for the fact, which I read in a newspaper, that this oligopoly has some sort of stranglehold. We have a vertically integrated oligopolistic situation within our electricity industry, as the noble Lord, Lord Jenkin, has pointed out. If you wish to deal with this stranglehold, it is crucial that you stick to the golden rule of in no way deterring investment in the panoply of the electricity industry. Investment is crucial. Either freezing electricity prices or putting a windfall tax on the big six does not conform to that rule.

What would conform to that rule, which you have to do, is to increase competition, which ensures that everyone can compete. As the noble Lord, Lord Deben, has said, that could involve very small competitors at every stage and in every sector of the electricity supply chain. Competition is vital to the success of the Bill and to the entirety of electricity market reform. The Bill will be judged on its long-term effects on the security of supply and on the decarbonisation of the electricity and, above all, on how effective it is attracting competitive investment.