Clause 1 - Security and integrity of supply
Energy Bill [Lords]
9:30 am
Mr Andrew Stunell (Chief Whip; Hazel Grove, Liberal Democrat)
I wish to speak to the amendments tabled in my name and that of my hon. Friend the Member for Lewes (Norman Baker). Both of the speakers so far have made essentially the same point. The clause in its present form may need moderation, but its fundamental assertion, which the Bill ought to contain, is that the Secretary of State must take overall responsibility for delivering the United Kingdom's energy policy. I was disappointed that the Minister circulated a letter saying that he intended to oppose the clause, although I was a little encouraged by his suggestion that he might be persuaded to introduce something on Report. I very much hope that he will say more about that.
The reality is that we live in a sophisticated economy, the fourth largest in the world, as the hon. Member for Tewkesbury said. There are many overlapping markets and in some places the market leaves gaps. In the meantime, the Government have quite properly set the country some complex environmental objectives, which everybody recognises as challenging and difficult to attain. That process has highlighted the fact that the gaps in the market are bigger than they perhaps appeared at first.
Then again, the markets are changing. The sources and availability of supply are constantly on the move, as is the demand end of the market. The common assumption is that demand is inexorably rising, but it is not doing so as much as the scare stories would suggest. Gross energy consumption in this country over the last 10 years has increased only by between 2.5 per cent. and 3 per cent., despite a 30 per cent. increase in gross domestic product. The hon. Member for Milton Keynes, North-East (Brian White) suggested
that those trends might be due to the more efficient use of energy by those at the consumption end of the pipeline. The most profligate and least efficient users of energy are now those in the domestic sector.
Given those factors, the obvious signs that the market cannot and will not deliver on such key objectives as energy efficiency and conservation and the evidence of investment starvation caused by the difficulties and uncertainties that have already been mentioned, the Secretary of State has an obligation to plug the gaps in the market. Doing so might mean ensuring improvements in efficiency and conservation in the domestic sector or reinvigorating the combined heat and power sector. The hon. Member for Milton Keynes, North-East mentioned the possibility of micro-CHP, which we will no doubt discuss later.
There are problems with getting investment in generation and transmission renewal under way, particularly with a changing market externally. There are also problems in achieving another of the Government's objectives; to reduce fuel poverty. The market has delivered a significant reduction in fuel poverty but, with oil likely to stay at its current price of about $40 a barrel for some time, it is doubtful whether the market can continue to deliver such reductions.
The underlying assertion of the clause and of the amendment is right. For the Minister, to use the classic phrase, ''resistance is futile''. If the clause does not get him, events will. Sooner or later, a Secretary of State will find himself standing at the Dispatch Box or sitting in a TV studio saying, ''It's not my fault''. I am sorry to say so, but at that point there will be no escape, either for the Minister or the Secretary of State or for their successors.
I diverge a little from the hon. Member for Tewkesbury, in what I took to be his advocacy of the BBC programme about the planet shutting down in the near future because of energy shortage. That is not going to happen now, or soon. NGT's scenarios for next winter envisaged the bleakest possible set of circumstances that could arise; I will not detain the Committee by listing the eight or nine things that could simultaneously go wrong. But even if all that happened, NGT said that there would not be a shortage of power next winter.
The joint energy security of supply working group says the same thing in its predictions for the next seven to 10 years. We are not talking about an imminent crisis in energy supply. Perhaps that is okay from the Minister's point of view; I notice that the average stay of Energy Ministers in the Labour Administration since 1997 has been one year and five months, so he is probably in the clear, whether or not clause 1 is retained.
However, in the long term, the UK should acknowledge that the Government—of whatever party—must take the ultimate responsibility. I suggest to the Minister that he should gracefully accept that now and sign up either to the clause, or to one or more of the amendments that we are discussing. No doubt he will tell us that if he were to do that, it would lead to the end of civilised life on the planet and a lurch
back to the economic stone age, but it will not. I accept that if the Liberal Democrats assert that that will not happen, that assertion might have little credibility, but the Conservative spokesman also made that assertion.
It is time for the Minister to accept that such an acknowledgement is not about reversing the liberalisation and privatisation of the past 15 years. It is about ensuring that the UK has a secure energy supply for the future and that the Government of the day acknowledge in advance their responsibility for that, so that they plan for it, rather than being caught in a disaster at the last moment.
Amendments Nos. 72, 73 and 74 offer alternative and overlapping helpful suggestions to the Minister of some of the things that he might want to include on Report. Amendment No. 72 examines the mechanism by which the Secretary of State's responsibility might be exercised. It says that energy supply would continue to be wholly the responsibility of the Gas and Electricity Markets Authority, unless GEMA itself reported to the Secretary of State that, having examined its powers, its regulatory authority and the market, it could no longer deliver the security of supply objectives that it had been commissioned to fulfil.
If that were the case, GEMA would give 12 months' notice, and the Secretary of State would be required to take action—or at least his delegation to GEMA would be withdrawn. The 12-month notice period provides a soft landing; an opportunity for negotiation, and possibly for new guidelines or legislative powers to be put in place. We believe that the amendment offers a simple way of expressing more clearly the thinking behind clause 1 in its original form. The aim is not to take back all the powers and regulatory apparatus from the existing structure, but to acknowledge that that regulatory structure might, at some time in the future, find itself unable to deliver the overall objectives. The amendment would provide a clear mechanism for reverting that power to the Secretary of State, with the trip wire of GEMA acknowledging it.
Amendment No. 73 is rather a different animal. It tries to delineate the key areas in which action will not be easily achievable through the market; the areas in which the Secretary of State might, if he is to achieve his overall objectives, have to take action that it would be difficult for the regulatory environment to deliver. One of those areas is the estimation of long-term requirements for energy at the point of use. The words ''point of use'' are important; it is not just about generating capacity but, as the hon. Member for Milton Keynes, North-East made clear, it is about what happens at the demand end as well as the supply end. It is also about the reduction in energy use that is achievable through conservation and efficiency measures.
There is a paradox in trying to use the market to reduce the consumption of any product. It is difficult to encourage and incentivise a manufacturer to sell fewer cars. It is hard to incentivise an electricity generator to sell less electricity to make more money, and the current system struggles to achieve that. It is
also difficult to incentivise domestic consumers to take account of an almost insignificant marginal cost—their energy use—and invest in conservation and efficiency measures, even though that would further reduce their marginal costs. No market action has been effective at penetrating those problems, so it might be reasonable for the Secretary of State to have reserve powers. Proposed new subsection (2)(a) in amendment No. 73, which deals with the ''provision of supply in a national emergency'', is obviously of a different order but is also outwith the ability of the market to deliver.
Amendment No. 74 would improve the decision making about long-term investment or potential intervention by the Secretary of State. It would write into the Bill the role of the joint energy security of supply working group. I was interested to hear the hon. Member for Milton Keynes, North-East's suggestion that it would soon be time to write that into the Bill. I do not know whether he got far enough through the amendments to notice that amendment No. 74 would do exactly that.
New clause 13 addresses the question of reporting the action that the Secretary of State has taken or thinks should be taken. At the moment there are various streams of reports on security of supply, which come to the Secretary of State from the JESS committee, NGT, Ofgem and others. New clause 13 would require the Secretary of State to produce at least an annual report that draws that information together and sets out what action has been taken in the past year and is planned for the following year. The new clause could stand on its own and be a weak alternative to clause 1, but it could also stand together with clause 1 or any of the amendments. It would introduce a reporting requirement on the Government simply to say what advice they received in the last year and what advice they intend to take.
My hon. Friend the Member for Lewes and I will happily support the two previous amendments, but I should be particularly happy to support the amendment tabled in the name of the hon. Member for Milton Keynes, North-East were he to move it; I understand that he may not. Sparring partners may not be the right phrase, but he and I have certainly been co-workers in the fight to ensure that the United Kingdom has a workable and sustainable energy policy. His amendment would build into clause 1 something that is otherwise missing.
Unfortunately, the Bill is not, in fact, an energy Bill. Our amendments aim to ensure that a broader vision is taken of what needs to be done; they are not about destroying the market but about filling the gaps that are left when the market has done the things that it does best. That includes addressing efficiency and conservation and some long-term investment and direction issues where the signs are that an approach based on a short-term market vision, although good in many ways, cannot deliver results.