Lord Whitty
Main Page: Lord Whitty (Labour - Life peer)
Lord Whitty
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.
Lord Whitty
Lord Whitty
My Lords, we are moving on to the transparency part of the provisions on investment contracts, but some of this reads across to other parts of the Bill. My amendment essentially would limit the exclusions in the information that the Minister will provide on the contracts and the transparency that they provide to Parliament. It would restrict it to trade secrets, which is provided for in Schedule 3(3)(b), and would delete two other exceptions on the grounds that they add nothing to the issue of trade secrets. Sub-paragraph (3)(c) refers to,
“information the disclosure of which, in the opinion of the Secretary of State at that time, would or would be likely to prejudice the commercial interests of any person”,
and sub-paragraph (3)(d) refers to,
“information the disclosure of which would, in the opinion of the Secretary of State at that time, constitute a breach of confidence actionable by any person”.
Quite apart from the subjectivity of that judgment by the Secretary of State, is not the information that we would rightly wish to exclude from any disclosure to Parliament or elsewhere all related to trade secrets? It is related to information held by the companies which are party to the agreements or other companies which are relevant to the agreement, which it would not be in the public interest to disclose and would not be in the interests of the signatories or contractors to the agreements to disclose.
I tried to find a definition of a “trade secret”. It apparently relates to anything which has not been disclosed to the public and which is of benefit to the holder of that secret. It is normally enforced by the confidentiality rules, which include commercial in confidence. In that case, surely sub-paragraph (3)(c), which deals with commercial in confidence, and sub-paragraph (3)(d), which deals with breaches of confidence that are actionable, fall under the paragraph dealing with trade secrets. If not, the suspicion has to be that the Secretary of State, by his or her subjective judgment, could exclude a whole range of other information that was pertinent to an understanding, by Parliament or by the public in general, of what are going to be pretty complex contracts. If we get a contract that is public and available to Parliament but heavily redacted because the Secretary of State thinks that in some direct or indirect way there might be a breach of commercial confidentiality of somebody who is not only not party to the agreement but not directly relevant to the agreement—or, indeed, any person—what does the Minister think, if I may boil it down to this, is covered by sub-paragraphs (3)(c) and (3)(d) which is not already covered by sub-paragraph (3)(b)? If other kinds of material are covered, we either need to be much tighter on the exclusions or spell out precisely what kinds of information could be legitimately redacted from any disclosure of the contracts.
These are hugely important contracts, matters of huge public concern which affect the future of our energy security, the cost to the consumer, the environmental impact and the cost to British industry and therefore British industry’s competitiveness. It is vital that as much as possible is disclosed about a contract without jeopardising the contract itself. That requires a relatively narrow delineation of what can be excluded: we must not have what looks like a fairly open door available to the Secretary of State to redact a whole lot more from the contract. I beg to move.
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.
Lord O'Neill of Clackmannan
I rise stimulated by the right reverend Prelate’s remarks, partly because when hydropower developments took place in Scotland, the nature of the opposition to them was very similar to the nature of the opposition to wind turbines today. Indeed, if you read any of the histories of hydropower in Scotland, you find the same arguments and the same kind of protagonists. Indeed, as I recall, one of the supporters of hydropower in the 1930s was expelled from the Perthshire hunt on the grounds that they were going to deface Pitlochry. Anybody who knows Scotland will know that Pitlochry is a great tourist attraction on the way up to Inverness and that the jewel in the crown of Pitlochry is the hydroelectric dam and the salmon leap there. If anyone were now to try to say that they wanted to close it down because it is spoiling the countryside, they would get rather a lot of fleas in their ears from the kind of people who say that they want to have hydropower but not wind power. That has to be taken into account.
Hydropower is one of the most attractive forms of generation. It is also interesting that subsidies for refurbishment have been made available to small-scale hydro, which may well be the case in Chester as well as in Deeside in Scotland. I had the opportunity of visiting one site some years ago because the kit had been refurbished in my constituency by the Weir Group of Alloa. The output had been increased from 70 megawatts of power to 81 megawatts, which was a considerable achievement. This is far smaller, but we can bring into play hydro opportunities that have perhaps fallen into disuse. It would be better if they could get the best possible deal because river flow—drought notwithstanding—tends to be pretty reliable. One would imagine that this, out of all the renewables, would be less prone to interruptibility and that therefore an amendment of this nature seeking to give a bit of extra assistance would be extremely helpful at this time. I support the amendment.
Lord Whitty
My Lords, the noble Lord, Lord Roper, and other speakers have made a very good case for looking at what the noble Lord says is an apparent contradiction, but I think is a clear contradiction, between the approach of the Valuation Office Agency and DECC to these things. We are talking about schemes that are very different from Pitlochry or whatever. We talking below 1.2 megawatts, but even at that level, I have some hesitation. If you were doing it for domestic purposes only, it is unlikely that you would get huge benefit in terms of your energy bill or your carbon footprint or that climate change would benefit any more than from putting a windmill on the side of your house in Notting Hill. It is not for domestic purposes. The way in which it is financed feeds into the grid and it therefore becomes a business. It is not entirely illogical for the business rates people in the Valuation Office Agency to take that into account, although the point made by the noble Lord, Lord Roper, about this being treated differently from other forms of renewable energy is an issue. I wish this amendment godspeed in terms of looking at the contradiction.
Lord Whitty
“(c) the establishment and operation of an Expert Advisory Panel to advise on the exercise by the Secretary of State of powers relating to CFDs, Investment Contracts or Capacity payments made under Part 2 of this Act.”
Lord Whitty
My Lords, we really are at the end now. I shall try to be brief but make no apology about turning to a subject that affects the deliverability and credibility of the entire Bill. When we had a discussion on the establishment of an expert committee, the Minister referred me to the clause to which this amendment applies. Clause 139(2)(c) provides for resources to be raised for the employment of advice. I have no objection to that, but ad hoc advice, as we said the other day, is not sufficient for delivering such a complex project. We are now horribly aware of that, having been through nine days in Committee. Apart from a few serious experts in DECC and possibly Ofgem, a few very sharp lawyers sitting in the big six and other interested parties that may be on the other side of these deals, we probably know as much as is likely to be known at this stage about the nature and process of the contracts, the difference in the process of investment contracts and to a lesser extent, given that a lot still is fairly obscure, about capacity mechanisms.
The public know nothing, the potential participants know nothing and consumers know nothing. DECC, the counterparty and Ofgem will face a complex process. They will have to deal with extraordinarily complicated and novel arrangements that do not reproduce anything extant anywhere in the rest of the world when it comes to electricity supply. They will be dealing with companies who are very sophisticated, who employ the very best advice and who, necessarily and rightly, are looking for a deal which will profit them as well as helping the long-term future of our energy security.
Delivering what is in the Bill, even though it is not that thick a Bill, will be an extremely complex process. Parliament and the public would expect departments and others representing the Government and the public in this process to have very solid advice. Some of that can be dealt with on an ad hoc basis, contract by contract and aspect by aspect. However, as was made clear in a previous debate, you need an institutionalised body which is clearly publicly known and respected, consisting of people with deep experience of the legal, financial, technological and economic issues which it is tackling. Above all, you need consistency. You need corporate memory and a body to oversee the individual officials and Ministers who, whether we like it or not, are not there for ever. They are often there only for a few months or years and cannot take full responsibility for negotiating these contracts.
The expert panel is an advisory panel, but it is an important strengthening of the whole process. I do not expect the Minister to change her mind today, but unless the Government recognise that they need something like this—they may want to call it something else—the deliverability of this whole process, on which so much depends, will look extremely shaky. I therefore hope that the Government will at least take on board that they ought to look at this concept again. I beg to move.
Lord Deben
My Lords, I very much oppose the amendment, which seems unnecessary. A great deal of advice is available and it is not necessary to have yet another committee. A committee has been proposed with a different role, which seems to me to have a much more sensible and wider view. That was in an earlier amendment—which has been withdrawn but which I have no doubt will come back—proposed by the former chairman of Shell UK, the noble Lord, Lord Oxburgh. That seems to be a much better proposal than this one. It is not necessary to shove this in at this point. The Secretary of State will have at his behest a whole range of people on whose advice he can rely. This gives him permission to do that, and although I am all in favour of giving him that permission, I do not want him to have yet another committee. I think that this is the wrong way to do it and I very much hope that my noble friend will resist the amendment. I rather suspect that she will, and it is always a pleasure to end such an afternoon, now almost evening, by entirely supporting my noble friend.
Lord Whitty
My Lords, I think that we are near the end and, clearly, I am going to withdraw the amendment. However, I am both disappointed and unreassured. I say to the Minister and the noble Lord, Lord Deben, that the body proposed in the amendment has a very different and more precise role than the one proposed by the noble Lord, Lord Oxburgh, which we can argue for in a different context.
The Minister is effectively saying, “We have all these technical experts; we’ve got an ad hoc panel; we are going to have another body involving industry and consumers; and we are going to have another ad hoc technological panel, once the legislation is passed”. It is obviously reassuring to some extent that the department is getting all this advice, but why not make it clear that we have a body of real expertise to oversee this gigantic exercise of changing the whole way in which we deliver our energy—a body that is to some extent institutionalised and recognised by Parliament? I think future Ministers will regret not having that body to support them. I hope I am wrong, but I think it would give Ministers sharpness of advice in the process and protection after it. I regret to say that I think the Minister’s successors may well regret her dismissal of this amendment today. With that, and with a happy summer to everybody and my thanks to the Minister and her department for all the help she has given us, I beg leave to withdraw what I think is the final amendment to be debated.