Dr Desmond Turner (Brighton, Kemptown, Labour)

I beg to move amendment No. 189, in

clause 84, page 64, line 31, leave out from 'Authority)' to end of line 35 and add 'for subsections (1) and (2) substitute—

''(1) The principal objective of the Secretary of State and the Gas and Electricity Markets Authority (in this Act referred to as 'the Authority') in carrying out their respective functions under this Part is the promotion of renewable energy, having due regard to—

(a) the duties set out in subsection (2), and

(b) the achievement of sustainable development.

(2) The duties set out in this subsection are—

(a) to protect the interests of consumers in relation to electricity conveyed by distribution systems, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity or the provision or use of electricity interconnectors; and

(b) to carry out their respective functions under this Part in the manner which he or it considers is best calculated to further the principal objective and the duty set out in paragraph (a), having regard to—

(i) the need to secure that all reasonable demands for electricity are met, and

(ii) the need to secure that licence holders are able to finance the activities which are the subject of obligations imposed by or under this Part, the Utilities Act 2000 or Part 3 or 4 of the Energy Act 2004.'','.

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

With this it will be convenient to discuss the following: Clause 84 stand part.

Amendment No. 190, in

clause 144, page 109, line 31, leave out paragraph (a).

Amendment No. 191, in

clause 186, page 144, line 10, leave out subsection (3).

Dr Desmond Turner (Brighton, Kemptown, Labour)

Good morning, Mr. Sayeed. If one has to spend a beautiful summer morning indoors, at least it is a pleasure to do so under your chairmanship. I shall endeavour to keep within the bounds of debate

that you have set, although I am sure that you will appreciate that we have reached a point during consideration of the Bill at which fundamental principles come into play. I shall try to limit my remarks as much as I can, but I trust that you will allow me a little gracious latitude should I stray.

Those of us who listened to my right hon. Friend the Prime Minister recently will have heard him enunciate the importance of climate change and the fact that Britain will make its contribution through renewable energy by achieving its 10 per cent. target by 2010 and so on. The amendment is designed to provide part of the legislative means to turn those objectives into reality. We can have the most marvellous objectives in the world, but if we do not will the means to achieve them we shall not do so. There is little evidence to suggest that we will achieve these aims unless we do something extra, and we are now talking about the something extra.

The regulator is one of the key players, if not the key player, in the scenario. We know from the brief history of the regulator's existence what can go wrong if the regulator does things that are unfavourable to renewable energy. That is why the brief to which the regulator is working is so important. The terms of reference and statutory obligations of the regulator are set down in the Electricity Act. A document issued only last month by the regulator sets out the statutory framework as seen by the regulator. It refers to

''the need to secure that all reasonable demands for electricity are met'',

which relates to security of supply. I can assure people that that factor is uppermost in the regulator's mind. The document also refers to

''the need to secure that licence holders are able to finance their licensable activities''

''the interests of the disabled, chronically sick, those of pensionable age, those with low incomes and those residing in rural areas''

as well as protecting consumers. That is fine.

The document continues:

''Subject to the above, the Authority is also required to carry out its functions in a manner which is best calculated to . . . promote efficiency and economy on the part of persons authorised by licences or exemptions to carry out licensable activities . . . protect the public from dangers arising from licensable activities, and secure a diverse and viable long-term energy supply''.

As an afterthought, it states:

''The Authority is also required to have regard to the effect on the environment of licensable activities and to any social and environmental guidance issued by the Secretary of State.''

It is my contention, which is wholeheartedly backed by those I have spoken to who are involved in any way with the renewables business, that, although the terms of reference may have been appropriate 15 years ago, they no longer are.

The amendment does not disregard the need to maintain security of supply or to retain a fair, competitive market, but sets those needs in the context of achieving environmental objectives through the deployment of renewable energy. Therefore, we would no longer have a situation such as when new electricity trading arrangements were introduced, and renewable generators were greatly disadvantaged because of their

stochastic nature and were liable for penalties. Market conditions that were extremely unfavourable for combined heat and power were set. Since the introduction of NETA, the growth of CHP has stopped dead. That is an example of how important an effect the regulator can have.

Mr Brian White (North East Milton Keynes, Labour)

I was a member of the Committee that considered the Utilities Bill. Similar assurances were sought at that time and similar amendments were tabled, but we were told that they were unnecessary. Does my hon. Friend agree that they were necessary?

Dr Desmond Turner (Brighton, Kemptown, Labour)

Well, the proof of the pudding is in the eating. Those assurances were necessary; they should have been not only given, but backed up. There has been a setback in the growth of renewable energy as a result of NETA; it has only slightly improved. Now we are proposing to extend the benefits of NETA to the whole UK through the British electricity trading and transmission arrangements. It is perfectly logical and sensible to have one electricity market, run according to the same rules and covering the whole of England, Wales and Scotland, but only if the rules are right. I have no confidence that the rules will necessarily be right.

Lest anybody should think that I am trying to pillory the regulator, I assure the Committee that I am not. However, the regulator is acting against his statutory responsibilities, and everything that he does follows from that. To illustrate the point, I cite the proposals for changes in the transmission charge regime that would accompany BETTA. In England and Wales, the National Grid Company charges according to location: the further the generator is from the point of consumption, the higher the transmission charge. However, Scotland operates on the basis of a standard charge, so, irrespective of a generator's distance from a notional site of consumption, the transmission charge is the same. The change will mean that a Scottish generator paying about 0.5p per kWh will pay 2p per kWh.

Think about the impact on renewable generation. Our renewable energy resources that are waiting to be tapped are primarily located off the west coast of Scotland. A renewable generator setting up off the coast of Scotland therefore has not only to face the considerable current problems, but under this system will carry a penalty of 1.5p per kWh, which could kill it stone dead commercially.

Mr Robert Key (Salisbury, Conservative)

Does the hon. Gentleman recall that a couple of years ago the then Energy Minister proposed the construction of the west coast interconnector from the outer islands? The estimated cost was about £700 million. Research showed that it would be closer to £2 billion, which really knocked on the head any hopes of introducing wind farming on a grand scale that could supply the market in Glasgow and round to Liverpool.

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

Before Dr. Turner responds to that intervention, may I remind him that this debate is about regulatory objectives?

Dr Desmond Turner (Brighton, Kemptown, Labour)

Thank you, Mr. Sayeed. I have been trying to keep on track. The hon. Gentleman is quite right. That plan was unfortunately a no-hoper because the cost of submarine cable is so high. The carrying capacity of the proposed cable was not going to be that great, so it would not have been good value, which is sad as it was a nice idea.

These proposals, which come from the regulator and are made against the statutory background to which the regulator works, would have an extremely damaging effect on renewable energy. The Government are aware of that. Clauses 180 to 184 set out a protective mechanism to prevent that from happening to renewable generators, but there are two points here. This will apply only to renewable generators. No one will build a gas-fired power station in Stornoway, but there might well be wave and tidal machines just off the coast. The only generation that will be affected by these proposals is renewable generation.

Having looked at the best efforts of the parliamentary counsel in clauses 180 onwards, I am not convinced that they are drafted in a way that would give anyone confidence. As we are trying to promote renewable energy against the background of a liberalised energy market, a regime that enables investors to invest with confidence in the long-term future of the enterprise is vital. At present, there is no investor confidence in renewable energy. It does not exist even for it to be frightened away. One of the prime reasons why there is no confidence is the current terms of reference—the legal framework to which the regulator works—and the implications for what follows in the structure of the market.

To put it bluntly, we have to be able not necessarily to distort but to angle the market in such a way that renewable energy is favoured. Otherwise, it cannot happen in a liberalised market economy. As it is, the Ofgem proposals for transmission charges carry a perverse incentive to non-renewable energy. If someone was simply looking to make money by generating electricity, they would set up a fossil fuel station in the midlands—somewhere just north of Birmingham, where the notional centre point of consumption is and where they would probably pay negative transmission charges. That perverse incentive also exists in the proposed system.

My hon. Friend the Minister also has responsibility for the Post Office, and we all know that it makes standard charges wherever a letter is posted from or to in the United Kingdom. A letter posted in Stornoway costs exactly the same to deliver to Westminster as one posted in Golders Green. I am sure that if, perish the thought, we were in a Committee debating a proposition to change the postal charging system from standard to locational, he would produce robust arguments to rebut it. He would be absolutely right to do so.

What is the difference with electricity? A letter posted in Stornoway is still identifiable as having been posted in Stornoway when it arrives in Westminster. However, a kilowatt-hour of electricity supplied to the system at Stornoway is not recognisable at all. It is just a stream of electrons. Energy is a national commodity and something that we need to consume on a national basis.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I am listening to the hon. Gentleman's arguments closely, and I am minded to offer him some support. However, he drew an analogy with the Post Office. The Post Office loses money and perhaps might not be considered as efficient as, for example, the telephone network, which does not work on the same principle. I am not attempting to trip him up, but I would like him to consider that.

Dr Desmond Turner (Brighton, Kemptown, Labour)

I thank the hon. Gentleman for that intervention, but I must point out that the Post Office is now making a profit. There may be comments on its efficiency, but they are outside the debate's remit as set by you, Mr. Sayeed, so I will not go into them. However, I believe that internet charges are standard, so there are plenty of good examples.

We need to promote renewable energy and fight climate change. Over breakfast this morning, I was reading that the Association of British Insurers estimates that its bill resulting from storm damage last year was £6.2 billion, most of which is attributable to severe weather events associated with climate change. We have just seen about 1,000 people killed in Haiti and the Dominican Republic as a result of a severe weather event, which again was almost certainly related to climate change. Severe weather events are already escalating considerably, and the process of climate change is only just starting. We have to intervene by making CO2 reductions as drastically and as early as possible.

In that process, we cannot afford to have a measure on the statute book that sets a log barrier in the path of achieving that aim, which is what the regulator's duty does. I am moving the amendment so that when making proposals to the market, the regulator bears in mind at all times the need to protect the interests of deploying renewable energy. I cannot predict those proposals, as this is a complicated business. However, that is our only way forward, and there is no time to waste. There will probably not be another legislative opportunity to change the framework for years to come. If we are going to do that, this morning's sitting is our only chance.

The hon. Member for South-West Hertfordshire (Mr. Page) has a great fondness for his traditional probing amendment. However, this is much more than a probing amendment; it is a real one. The Government should have put this measure in the Bill from the beginning. I know that there is enormous support in the industry for changing the regulator's terms of reference so that he acts for the good of climate change as a primary responsibility. I would advocate, for instance, that the location charge

proposals for transmission charging be dropped, and that we have a standard system. It could be done and we could still arrange all the other processes of financing new grid investment.

It works in Scotland; since devolution, we have learnt that several things work better in Scotland than in England and Wales. I am not trying to encourage the hon. Member for Angus (Mr. Weir), but it does happen, and this may be such a case. I propose the amendment in great seriousness and commend it to the Minister. I do not think that he can ignore it, or that the Government should ignore it, because it is much too important.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I agree with the hon. Gentleman's opening remark that if we have to be here on such a sunny day, it is a delight, Mr. Sayeed, to do so under your chairmanship.

During the week that we have just enjoyed in our constituencies, I was considering how to resolve the issue that the hon. Gentleman addressed. I wondered if the right time to do so was later in the Bill, but on reading this amendment, I can understand why it has been tabled here. It is important, if he will forgive me for saying so, to look beyond his natural eloquence and consider whether the amendment addresses what we are trying to achieve. Having wrestled with the issue myself, I think, by and large, that it does. It addresses not only the industry's concerns, but those of consumers across the country.

We are extending NETA to Scotland, which raises the issue of the important relationship between where electricity is generated and where it is consumed. There is the argument, with which I teased the hon. Gentleman, that if one phones a longer distance on the telephone network, one pays a greater price for the privilege. However, as he also pointed out, there are analogies that suggest the opposite might be the best way forward. I am not sure which is the right system; perhaps a mixture of the two.

We must consider the generation of electricity throughout the Kingdom, or at least Great Britain, in that context, rather than in a piecemeal way, especially given the challenge of global warming. I am sure that you, Mr. Sayeed, will call me out of order if I stray too far down that road, but what bothers me about global warming is that as well as doing our bit—I use the word advisedly—we must address the problems that global warming will cause throughout the developing world. We must not think that we can solve them. I want to make that point because it is important that we do not handicap ourselves with systems that will not have a global impact. That said, I shall move swiftly on. However, that is not an excuse for doing nothing, although we should bear it in mind.

Dr Desmond Turner (Brighton, Kemptown, Labour)

On the international effect, does the hon. Gentleman agree that a regulatory system established in Britain that encouraged the rapid development of wave and tide technologies, for example, would be highly exportable and would thus have an international impact?

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

The hon. Gentleman is absolutely right. I spoke earlier about my visit to Finland. I have already made it clear that I believe that its advances in the nuclear industry should be exported to this country. I accept that anything we can develop would be beneficial. My concern is about advances in places such as India and China, which have massive populations, and the enormous demand that they will create. It is important that those countries, too, address the issue of global warming. This country contributes only 2 per cent. of the world's carbon emissions, which is a very small amount. Wiping out all our carbon emissions would have virtually no impact in global terms; we may contribute more by exporting our technologies.

I will not repeat the hon. Gentleman's arguments as I want to listen to the rest of the debate and hear what the Minister has to say. My hon. Friends and I are minded to support the amendment.

Mr Brian White (North East Milton Keynes, Labour)

There is a sense of deja vu about the debate, which we had on the Utilities Bill, the Communications Bill and on my own Sustainable Energy Bill. We keep coming back to the same points; the fundamental issue is how to achieve Government policy when there is a system of independent regulation. I recall that the Utilities Bill included a passage from the Labour manifesto, which the Government later removed. But that is ancient history.

In the Utilities Bill—to which amendments were tabled that were similar to those tabled by my hon. Friend the Member for Brighton, Kemptown, to this Bill—the Minister assured the Committee many times that problems would not arise. I am sure that his assurances were genuine, but advice from officials was that I was going over the top—I probably was—and making assumptions about CHP that would not stand the test of time. The advice was that the Minister was right to resist the amendments, but they should be Government policy.

My hon. Friend has already outlined some of the consequences. We know what has happened to CHP, but when NETA was introduced there were many problems for small businesses. The problem with an independent regulatory system like Ofgem is that it favours large companies, which have the back-up of expensive lawyers and economists who work to different models. We should pass over the history of the economic energy forecasts of the Department of Trade and Industry.

The problems in the renewables industry are caused not because the companies are not viable or because they do not do good work, but because the regulatory hurdles that are put in place are relatively easy for a large, global company to jump over but not for a small or start-up company.

Ministerial, or even prime ministerial, statements will not achieve the objectives if companies hit problems at the first hurdle of dealing with the regulator. It is clear that the regulator does not intend to cause damage, so why is there a problem? I do not apologise for repeating what the first Oftel regulator, Sir Bryan Carsberg, said when giving evidence about the Communications Bill; if it is not in the statute, it

does not exist. Regulators look at the statute; that is all. There may be wishful thinking and policy may be made, but if it is not in the legislation, it does not exist. It may exist further down the food chain, but the primary aim of the regulator is to examine what is in the Bill for his terms of reference.

My hon. Friend set out a good case for making climate change part of the terms of reference. It may be that we do not want that to be part of the regulator's terms of reference; that is a fair point, although I disagree with it. That is what the Conservatives wanted when they originally proposed a regulator. They believed in a full-blown free market and other considerations were not in their Bill. The free market dictated what happened; that was their policy, which was set in statute.

I refer the Minister to the debate on my Sustainable Energy Act 2003. I tabled an amendment relating to the terms of the regulator, which was similar to the proposal tabled by my hon. Friend to this Bill. In my Bill, we compromised and agreed that the regulator would consider environmental impact assessments. The jury is out on whether that has achieved everything we hoped for, but it has improved the situation. I commend the regulator, because Ofgem has responded and is making good steps. However, having an environmental impact assessment is not sufficient because the regulator will say that what matters are the terms of reference, which my hon. Friend read out.

There was an agreement in the Energy Council in 2002, and a new directive requiring independent regulation, which we have, transparency—we are getting there—and non-discriminatory access to infrastructure. I contend that leaving the regulatory framework as it is discriminates against small companies, against renewables and against several other activities.

Dr Desmond Turner (Brighton, Kemptown, Labour)

On the point about discrimination, it seems impossible under the present or proposed regulatory framework for an independent renewable generator to set up generating plant off the coast of Scotland, for example. I have discussed that viewpoint personally with the regulator.

Mr Brian White (North East Milton Keynes, Labour)

My hon. Friend makes his point very clearly. The real question is how to change the regulator's terms of reference. The only way to do so is in statute. It has been 15 years since the Electricity Act was passed, and four years since the Utilities Act 2000 and our experience is that, on the whole, they have worked well. I would not dispute that we need an independent regulator in a competitive framework and I concede to the Minister that it has worked reasonably well. However, I do not concede that it has addressed the problems that we have highlighted or that it is capable of dealing with them.

We must consider how to change the terms of reference and we have the opportunity to do so in the Bill. The Minister may say that now is not the time to

do that. If, after 15 years of experience, now is not the time to look at it, when will we do so? Perhaps it will be The Day After Tomorrow.

The other issue that concerns me is the difference between primary and subsidiary goals. The regulatory framework is set up in such a way that there is a primary goal. That is fair enough, except that the subsidiary goals that are outlined—including the environmental and social policies to which the regulator must have regard—are subsidiary to the primary objectives. Let us compare that with Ofcom, whose role is to balance competing goals and objectives and to come to the best conclusion in the interests of customers and citizens. That is a clear indication that matters are far more complex than simply the bottom line in the market. But Ofgem has a primary goal. The other considerations are subsidiary.

My hon. Friend's amendment seeks to make sustainable development an overarching primary aim. Given the importance of climate change if sustainable development is not a primary aim, how will it be considered when the regulator's duty is to carry out the primary aims and only then to look at subsidiary actions? There is another point about the way in which regulatory impacts work. There is a lot of disillusion and cynicism about voting in this country. We shall be voting on Thursday. People ask why they should bother to vote as they feel it makes no difference. If we are unable to effect Government policy because the regulator is statutorily independent and the only way is the nuclear option of introducing a new Bill, there is little wonder that people are cynical about politicians' ability to effect change.

There is a fundamental philosophical issue that is far wider than just Ofgem. Today is not the day to have that debate, but there is real issue about the relationship between achieving Government policy—in this case on renewables—and the ability of a regulator to effect that. One need only look at Ofgem's response to the transmission charge to which my hon. Friend referred and the way that the National Consumer Council is up in arms, despite the fact that looking at social conditions and disconnections is a key objective of the regulator.

One of my other concerns is that by not accepting the amendment we are subject to the whims of the individual regulator. We should not be reliant on the individual characteristics of Stephen Littlechild, Clare Spottiswoode or Callum McCarthy or a board like Ofgem, which has its own culture.

Ms Joan Walley (Stoke-on-Trent North, Labour)

During various inquiries, the Environmental Audit Committee had exactly the same debate about how to influence previous regulators, particularly Clare Spottiswoode. Such was our frustration that we felt that the only way to get sustainable development into legislation was to put it on the statute book.

Mr Brian White (North East Milton Keynes, Labour)

The Environmental Audit Committee has had far more experience than I have on this and has looked at it in greater detail. My experience is limited to serving on Committees as a Government foot soldier. We have a fundamental choice with the clause.

Either we follow the route of Thatcherism, which undoubtedly means that the Conservative Members will support the Minister in resisting the amendment, or we support my hon. Friend the Member for Brighton, Kemptown by following a third way and trying to input regulation and competition into an overall policy framework. I appreciate that my hon. Friend the Member for Southampton, Test (Dr. Whitehead) and I have different views on whether policy has a role in the work of the regulator.

Dr Alan Whitehead (Southampton, Test, Labour)

My hon. Friend has read my speech.

Mr Brian White (North East Milton Keynes, Labour)

We have had this discussion before. However, the issue is whether there is a simple goal or a more complex world. With Ofcom, we recognised that there is a complex world in which differing pressures have to be reconciled in the interests of citizens and consumers. Ofgem has not recognised those competing demands and has only a simple goal. The fundamental choice between those two is what the clause and amendment bring us to today.

If the Minister does not accept the drafting of the amendment, there may be a better way of looking at it. However, not to accept the amendment would be a change, as our decision on it will send a strong signal to the market, a signal that will determine the success or otherwise of the renewables industry. Not accepting the amendment would be a clear statement that the problems that we have had in the past will continue.

I am afraid that the Minister will come up with all sorts of good arguments for why everything is wonderful, and I am sure that he will be convincing. However, at the end of the day, the regulator will still return to the statute book for guidance. If the Minister rejects the amendment and does not consider introducing something on Report, his successors will be wondering why we are not achieving our renewable objectives and will be asking their officials why. We will have created a systemic problem for ourselves in how the regulator works and the terms of references that we have given him.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

It is always a pleasure to follow the hon. Gentleman, who, as always, has made a powerful case on an issue that he understands well. Like me, he is a veteran of the Committee on the Utilities Act 2000—

Mr Brian White (North East Milton Keynes, Labour)

Refugee.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

Is that the word? The hon. Gentleman is right to say that we have visited the issues on many occasions. He referred to one amendment, which was actually mine. It attempted to insert Labour party policy into that Act by taking targets from the Labour manifesto. The Whip on that occasion was commendably asleep—I hope that we can expect a repetition today—and the amendment was passed. We had the ludicrous situation of a Lib Dem moving an amendment to introduce a Labour manifesto commitment that was then taken up by the Labour party on the Floor of the House.

My point is that we are in a strange situation. I do not want to flatter Labour Members unduly, but they understand the issues, are genuinely committed to them and have had pledges included in their party's manifesto. They have also tabled the right amendments, but when the Minister comes along with a golden share from goodness knows where, the amendments are suddenly lost. I wonder how we can have that situation.

All three parties support the concept. Clause 84 was inserted in the House of Lords, having been tabled by the Liberal Democrats and supported by the Conservatives. Its concept is not dissimilar to the amendment moved by the hon. Member for Brighton, Kemptown, so all three parties seem to agree that there should be a requirement on the authority to ensure a contribution to achieving sustainable development. However, we are not certain that it will be in the Bill, because the Minister is following a briefing that was not written by his party colleagues or special advisers but by civil servants, who perhaps have a different view. If I can make one plea, it would be for Ministers to listen more to their Back Benchers and less to their civil servants.

The hon. Member for Milton Keynes, North-East (Brian White) rightly referred to the Sustainable Energy Bill, which he introduced and which I am glad is now an Act. That Bill contained a clause to place a duty on Ofgem to have regard to sustainable energy policy and to produce regulatory impact assessments that included environmental impact assessments as a matter of course, so we have been round this way before. We have had many promises.

The hon. Gentleman was persuaded on that occasion to omit the sustainability duty by this Minister, who argued that it was an unnecessary addition because the key elements for sustainability were already set out in guidance. However, we have heard, rightly, that guidance is no substitute for words in statute. Guidance is fluff; it is peripheral. It is there if someone wants to call on it, but it is not central and can be judiciously ignored. If a regulator is keen to perform its duty properly but is busy and does not have time to consider all the guidance, it considers what is on the statute book.

Mr Brian White (North East Milton Keynes, Labour)

To be fair to Ofgem, does the hon. Gentleman recognise that, since the introduction of that Act, it has been doing impact assessments and there have been significant changes in how it works?

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

Yes, that is a fair point that the hon. Gentleman made earlier. But guidance is no substitute, as I think he would accept, for clause 84 of this Bill or for the amendment moved by the hon. Member for Brighton, Kemptown, which I am happy to support. He was right to talk about the market distortions caused by NETA and, in particular, the catastrophe with CHP. Not only will the Government target not be met; we are going backwards on CHP generation. That

is solely down to the guidance and how it has been operated by Ofgem, NETA and so on. That failure should be corrected.

The Prime Minister and others say that the Government are committed to trying to deal with climate change, and I believe them. They introduce policies that, in one form or another, are designed to help to tackle climate change, which are welcomed. We are now discussing a clear example of something that is necessary to tackle climate change and to ensure that the regulator is on the right track and following Government policy, which it should be, but the Minister seems to want to reject it.

I do not know what the Minister's argument will be. He may say that the Government should not interfere in the role of the regulator and that it is for the regulator to do its job, but the Government must interfere. They set the framework, whether or not the Minister likes that. He and his predecessors have set a framework for the regulator that says, rightly, that it must take care of consumer issues, for example. Given that the Government have accepted the principle that they can dictate the direction of the regulator in that way, what is wrong with setting down the principle that they should set the direction of the regulator on a different issue, sustainable development? I do not understand why the Minister wants to resist that. He clearly does, because he seeks to delete clause 84.

The hon. Member for Milton Keynes, North-East was right to say that Ofgem had improved—I put it in those terms—from an environmental perspective. However, it has a history of accepting little more than the narrowest short-term market philosophy for its operations and regulatory regime. That is how it has interpreted its role. I suspect that, 15 years ago, as the hon. Member for Brighton, Kemptown said, that was what the Government of the day wanted. There was not the understanding of climate change and the environmental imperative that there is now, so it was not thought about in the legislation. However, we know about it now. We are 15 years further on and we are older and wiser. We have a bigger problem with climate change, which we all know about. The science is accepted by everyone except possibly President Bush. We must try to deal with the problem, and this proposal is an example of a way in which we could do so. The hon. Member for Milton Keynes, North-East is right; if we do not deal with the problem now, when will we?

I hope that, having heard the arguments advanced in the House of Lords by the Liberal Democrats and the Conservatives, and the arguments advanced by his own wise Back Benchers, who understand these issues, the Minister will tell us what he is going to do. One option is to accept the amendment. His second option is not to move the amendment to delete clause 84. The third option, which is just about acceptable, is to say that he accepts the principle of the amendment or of clause 84 and to return on Report with something that is satisfactory but retains the kernel of the argument that has been put by hon. Members for a duty of sustainability. It would not be satisfactory for the Minister to say that it is not necessary because it is

covered elsewhere in the Bill, that there is guidance and that Ofgem is hunky-dory. That would not be good enough.

If the Minister does not come forward with one of those three options, I hope that Labour Members will force the issue. I understand that they do not want to rock the boat unnecessarily; if they can negotiate behind the scenes with the Minister, so much the better. However, now that the Minister has led the Committee up the hill, there comes a time when we must vote for what we believe in. There have been lots of opportunities to do that, for example through the Utilities Bill and the Sustainable Energy Bill, but the Government have ducked them all. They should be made to follow through their manifesto.

Dr Alan Whitehead (Southampton, Test, Labour)

It may be observed that some members of the Committee have a ruddy glow to their complexion after the recess. I have no such ruddy glow because I have been sitting in a darkened room practising for the idyll that is your chairmanship, Mr. Sayeed.

The amendment before us is tempting because it addresses a number of problems with the development of renewable energy and the aims of reaching particular targets. As my hon. Friend the Member for Brighton, Kemptown mentioned, it appears to address the issue of how to create mechanisms to progress towards those targets. I share his concern, and those expressed by other hon. Members, about the problems that have arisen with CHP. However, we must look further than the mechanisms suggested in the amendment and consider what we do when we establish a regulator.

The point of a regulator is to regulate the market that arises post-policy. Therefore, it is important that the regulator is a rower, not a steerer. Policy is determined and, as hon. Members have said, is placed in statute. The regulator then regulates the market after it has been bound and guided.

Dr Desmond Turner (Brighton, Kemptown, Labour)

I have sympathy with my hon. Friend's argument, but he is making an argument in favour of the amendment. The previous Ofgem regulator did precisely what he is worried about; he made policy. He focused on one aspect of his mandate—the competitive market—to the exclusion of all else. That practically put British Energy out of business and totally inhibited investment in any new plant, whether it was fossil fuel burning or renewable.

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

Order. Is this an intervention or a speech?

Dr Desmond Turner (Brighton, Kemptown, Labour)

It is an intervention so I will be brief. The regulator prejudiced security of supply. He made policy, which he could not have made had he had a clear policy directive from statute such as is proposed in my amendment.

Dr Alan Whitehead (Southampton, Test, Labour)

My hon. Friend makes an important point, with the exception of the last phrase that he used in his intervention; ''such as is proposed in my amendment.''

Regulators have occasionally attempted to push the boundaries of their powers and could have been described as making, if not policy, then certainly quasi policy. However, that is not the central point in terms of what we here do as legislators. When we add a statutory duty of a regulator to do certain things, we must be clear about what it does.

The amendment would place a policy imperative within the regulator's remit, which would not be for policy guidance. That imperative would not include the measures within the Bill that guide the regulator and define how the market is undertaken, but would be within the regulator's remit. My hon. Friend the Member for Milton Keynes, North-East mentioned that such measures should be in the Bill. The Sustainable Energy Act, which passed through the House a short while ago, will change the way in which the regulator looks at how he or she regulates the market, and this Bill, in its totality, will do that too.

Subsection (1) of the amendment includes the words:

''The principal objective of the . . . Authority . . . in carrying out the respective functions under this Part is the promotion of renewable energy''.

That is a policy directive within the regulator's power and remit. Hon. Members have described concerns that they have had with the regulator making policy or quasi policy, and the problem with that is that the regulator could not only make policy under such circumstances—

Mr Brian White (North East Milton Keynes, Labour)

My hon. Friend is making a strong case, but does he accept that there are issues where the policy direction has conflicts? Should not the Bill give the regulator the means by which they can resolve such conflicts?

Dr Alan Whitehead (Southampton, Test, Labour)

My hon. Friend is absolutely right, but my argument is that we should not do that in this way, because of the point that I shall emphasise and with which I shall conclude—

Dr Desmond Turner (Brighton, Kemptown, Labour)

If my hon. Friend does not think that it should be done in this way, which would change the statute to which the regulator has to refer, what alternative mechanism would he propose?

Dr Alan Whitehead (Southampton, Test, Labour)

I would suggest, first, that there is the method of introducing statutes that cause the boundaries within which the regulator regulates the market to operate in a certain way. Secondly—this is a wider issue that has not been debated to the extent that it should have been—there is the notion of what it is to be a regulator, which must be considered. However, it is perhaps not doing a service to the notion of regulation to have that debate within the context of one amendment to one Bill. I do not think that the amendment—worthy though it is in many respects—does that, because under subsection (1), the regulator would have the policy objective of promoting renewable energy. I am firmly committed to that objective which, to the extent that I can influence the legislative process in this House, I have attempted to advance.

We might have cause to regret a power that enables a regulator to say, ''Whatever Ministers and subsequent legislators say does not matter, because I am pursuing my policy objective of renewable energy.'' Hon. Members have talked about regulators who excessively defer to the market without regard to the concerns that bind that particular regulation of the market. If a regulator had that particular power under his or her belt, he or she could decide to take out of the hands of Members of this House and of legislators the authority to decide what promoted renewable energy. We in this House cannot stand by such a principle.

Mr Brian White (North East Milton Keynes, Labour)

Surely current regulation places us in that position, to the detriment of renewables?

Dr Alan Whitehead (Southampton, Test, Labour)

Substantially, I agree. In the past, the regulators have excessively emphasised the market per se and not the market as bound by things that cause it to go in a certain direction. The amendment would do precisely the opposite, so that before the regulator started his or her job of regulating the market, he or she would have the additional policy responsibility of deciding how to achieve the goals of renewable energy. That is over and above the sort of responsibility that we have given any regulator before. With respect, it is the role of the Members of this House and of Government to decide such matters and to legislate accordingly.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

The hon. Gentleman wants to play on particular words of the amendment, which he is entitled to do. However, I believe that he accepts that, so far, regulators have not operated in the interests of the environment. Is he therefore attracted to the retention of the clause, which is another way of dealing with the issue, as it requires the regulator

''to ensure the contribution to the achievement of sustainable development''?

Dr Alan Whitehead (Southampton, Test, Labour)

It is absolutely right that we review, not in Committee, but more widely, the way in which the regulator has worked in the past and might work in the future. I have in mind not only this regulator, but regulators of the machinery of government. I emphasise that several of the regulatory regimes set up by the previous Government gave enormous latitude to the idea that the regulator simply removes impediments to the market. The regulator does not act in a way that enhances the effect of the market on what has bound the market in the first place.

The responsibility is twofold and relates, first, to government and legislation and ensuring that the regulator operates according to the statute and, secondly, to the way in which the statute is written. It is a tempting idea that one writes a policy imperative into an element of the statute relating to the machinery of government; that is, to the working of the regulator. That would, however, undermine the idea of how good legislation should work as far as the regulator is concerned.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

I am surprised by that idea. I would not use the word ''Thatcherite'', but it is certainly moving in that direction. There are already duties on the regulator. There is, for example, the duty to protect the consumer, a policy that the Government have set.

Dr Alan Whitehead (Southampton, Test, Labour)

That is not a policy.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

It is. It is a policy to ensure that the interests of the consumer are protected. What about protecting the interests of the environment? Why should not that have equal weight?

Dr Alan Whitehead (Southampton, Test, Labour)

I am afraid to say that the hon. Gentleman is confused. To elucidate, I refer to the current Leader of the Opposition when he was Home Secretary. He announced that his policy was that prisoners should not escape. It was an administrative fact that prisoners did escape, so he was not responsible for the fact that prisoners had escaped. I am sure that all Opposition Members well remember the episode with the director general of the Prison Service, Mr. Derek Lewis.

The important lesson to draw is that, risible as that defence was, the mechanism of the regulator has to be post-policy, whether we like it or not. If we wish to change that, so far as the Government are concerned, we will not change it on the Floor of a Committee considering an energy Bill. We will change it through the machinery of government and the way in which the regulator works.

Hon. Members have said that, in many ways, the regulator has worked well. One might say that other regulators in other sectors have not worked well. I have already alluded to why I think that others have not worked well. To some extent, it is the responsibility of the Government and legislators to ensure that the regulators work well.

Mr Brian White (North East Milton Keynes, Labour)

Will my hon. Friend give way?

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

Order. Before the hon. Member for Southampton, Test (Dr. Whitehead) takes the intervention, may I remind him that we are talking about the regulatory objectives under this amendment? Arguments are being repeated.

Mr Brian White (North East Milton Keynes, Labour)

My hon. Friend is making a strong case for regulators. However, is not the consequence of his argument that regulators do not withdraw from regulation even when it is appropriate to do so?

Dr Alan Whitehead (Southampton, Test, Labour)

I would find it difficult to respond to that intervention without tripping over your clear guidance that I should not repeat what I have said before, Mr. Sayeed. The regulators are bound by what they are required to regulate. However, in terms of their daily job, they work in a somewhat uncertain environment and have to respond to the way in which the market moves and to the way that the legislation develops the manner in which they regulate the way in which the market moves subsequently. It is therefore a difficult point to develop adequately.

Ms Joan Walley (Stoke-on-Trent North, Labour)

I am having difficulty following my hon. Friend's argument about the regulatory objectives. If the objectives are not set and defined by statute in this Committee and in the scope of the Bill that we are now considering, where would the precise terms of reference of a regulator be met?

Dr Alan Whitehead (Southampton, Test, Labour)

I fear that I have not made my points very clearly. Of course, the objective of the regulator should be defined by statute. In my view, what should not be defined is a policy objective for the regulator that is separate from the statute, which defines how the regulator works in terms of the mechanics of government. Without repeating myself, I am not sure that I can make myself much clearer than that.

I ask my hon. Friend the Member for Brighton, Kemptown to regard this as a probing amendment rather than as one to put to a vote. The principle of considering how we bind the regulator has a great deal of merit, and I have sympathy with many of his arguments. However, I do not think that we should use this vehicle, so I ask him to withdraw his amendment or to indicate that we can discuss the matter further. As hon. Members have mentioned, we should look at further methods of ensuring that the role of the regulator as a rower is properly bound by statute.

Mr Michael Weir (Spokesperson (Environment & Food; Health; Rural Affairs; Trade & Industry); Angus, Scottish National Party)

I also found great difficulty in following the hon. Gentleman's argument. It seems to me that the amendment as phrased promotes policy, as it gives the regulator the overriding objective of promoting renewable energy. This would be the only place in the Bill that would place a duty for the promotion of renewable energy.

The object of this part of the Bill, as I understand it, is to increase the use of renewable energy to tackle the Kyoto targets on CO2 emissions and the like. With the advent of BETTA, the role of regulators will become more and more important in the UK electricity industry. If there is nothing in the Bill to promote renewable energy, the regulator will have no specific duty to take account of it. As the hon. Member for Milton Keynes, North-East forcefully pointed out, it does not matter what we or the Minister say in Committee. The regulator will not be bound by what we say if such a provision is not in the Bill. It is time for us to take a stand and say, ''We want renewable energy to become an important part of our energy mix and, to do so, we are putting duties on the regulator to take that into account.''

The Government have, to some extent, accepted that the regulator may not take account of renewable energy if it is not in the Bill. I draw the Committee's attention to what the proposed subsection (2) in amendment No. 189 says about distribution systems and their cost. For many years, we in the north of Scotland have had a hydro benefit, which takes into account the increased cost of distribution there, particularly in remote areas. If I recall correctly, the regulator decided that that could not continue under European law and wanted to scrap the hydro benefit. There were discussions and, to be fair to them, the Government intervened. An amendment to the Bill was introduced in another place to allow the hydro

benefit to continue, albeit in a slightly different form. Had their lordships not accepted that something needed to be put in the Bill to avoid the regulator going down that route, the hydro benefit would have disappeared, with potentially disastrous effects for the many people in the north of Scotland who rely on electricity.

In discussions, the Scottish and Southern Energy Group, of which Scottish Hydro Electric is now a part, told me that without some benefit to distribution in the north of Scotland, distribution charges in the Western isles, for example, would be astronomical. This issue is important: even the Government have accepted that something needs to be put in the Bill to protect consumers. The same principle applies to renewable energy, and I shall support it if the hon. Member for Brighton, Kemptown wants to press the amendment to a Division. An important principle is at stake.

Mr Richard Page (South West Hertfordshire, Conservative)

I congratulate the hon. Member for Brighton, Kemptown on the excellent amendment that he has proposed. I only regret that he did not ask me to add my name to it when he tabled it, so that it could have gone forward with a true concordat from both sides of the House. I hope that that has not damned it in the Minister's eyes, and that he will consider it on its merits rather than on party political aspects. However, I expect that he will firmly reject it for other reasons.

The hon. Member for Brighton, Kemptown said that we have an opportunity to get this issue right and to set our energy policy in legislation. Having pointed out huge gaps in the Bill, the Conservatives agree. When he spoke today, I was reminded of the Patents Bill that was before the House yesterday. I remember debating previous patent legislation in the 1990s. That legislation was not perfect when it went through the system or when it emerged, and it is still being amended now, which means that we have had 12 years of legislation that was not as good as it could have been.

I can only endorse what the hon. Gentleman has said, and I hope that Ministers will focus not on their immediate political position but on the future, which leads us to the issue of renewable energy. However, you have given us a strict direction, Mr. Sayeed, not to talk about the value of renewable energy, so I shall resist the temptation to talk about it, but I will say that I do not think that any member of the Committee is against the principle of a sustainable renewable energy policy; I hope that nobody will jump up and disagree with that statement. It is absolutely vital to insert in the Bill the regulator's responsibilities, targets and duties.

What have we at present? I shall not read out clause 84, as it is there for everybody to see. However, I am taken by the last few words, which say:

''The principal objective and general duties of the Secretary of State and the Authority''

''to ensure the contribution to the achievement of sustainable development.''

I contribute to flag days by buying a flag for various charities, but I hardly think that my contribution will be absolutely vital to achieving their aims. We want to

achieve the objective in the clause, and we do not want the Minister to have a relaxed attitude towards it. He can contribute, and we may or may not achieve our aim.

Mr Brian White (North East Milton Keynes, Labour)

Is the hon. Gentleman surprised at that wording, given that it was a Liberal Democrat amendment in the House of Lords?

Mr Richard Page (South West Hertfordshire, Conservative)

I know that the hon. Gentleman has political ambitions, but it is a little cheap to have a go at the Liberals. He must choose tougher targets and move up the scale if he is to make his mark in the political world in which we live and work. I should be more than prepared to debate Liberal policy but again, Mr. Sayeed, you would be right to drag me back to order.

I shall not go through amendment No. 189 in great detail, because the hon. Member for Brighton, Kemptown has spelled it out to the Committee in reasonable detail. However, there are some tough, hard-hitting targets, duties and objectives, including

''the achievement of sustainable development''

—not a contribution to sustainable development, but its achievement. That means that we shall get somewhere. The duties are

''to protect the interests of consumers''.

I shall not read the rest. Subsection (2)(b)(i) talks of

''the need to secure that all reasonable demands for electricity are met'',

but the Committee will remember that when we debated clauses 1, 2 and 3, the Minister wiped out all those targets and responsibilities and the case for a CO2 target, despite the delicate words of the hon. Member for Milton Keynes, North-East, who presented the case in a honeyed and soft fashion. The Minister gave him the brush-off, about which I was most upset. It is not a good sign for the hon. Gentleman for the future, but he must persevere and stand by his guns on such matters.

The exchanges that have taken place in the last half hour have spelled out the importance of inserting measures in the Bill, because the regulator must be guided by statute. Showing my great age, I served on the Committee that considered the Telecommunications Act 1984, which established Ofcom, of which Sir Brian Carswell was the first regulator. We were flying blind, because we were setting up for the first time a regulator to undertake duties required to regulate the telecom market. With hindsight, I wish that we had given more guidance, but we did not have the experience. However, we have such experience now, so why is a similar provision not in the Bill now? I do not think that I shall be breaking any official secrets by saying that when Mrs. Spottiswoode, the former gas regulator, used to come into the Department, the politicians naturally made one or two suggestions that perhaps things could be done in this or that way, but she said, ''No. My duties are clearly defined. They are there in regulation.'' So we could not do a thing, and rightly so.

Perhaps with hindsight, we were working, heaven forbid, for short-term political gain. However, we need clear future direction, as we have all agreed, except for the hon. Member for Southampton, Test.

I never like upsetting people. If I meet them afterwards, they get uptight because I may have been unwittingly rude. The hon. Gentleman is looking seriously at me, but he is muddling up political objectives and regulation. He can leap in to reply after I have completed what I am going to say. He mentioned that the leader of the Conservative party, who is doing a fantastic job, said that his policy was that prisoners would not escape. Obviously prisoners will escape. Our Prime Minister has said that there are weapons of mass destruction, but that does not mean that there are. If there had been a weapons of mass destruction Bill, he might have been in a degree of difficulty.

Dr Alan Whitehead (Southampton, Test, Labour)

The hon. Gentleman has got things precisely the wrong way round. It is important to separate legislation and post-legislation functions. The leader of the Opposition actually stated that his policy was that prisoners do not escape, and the regulator or head of the agency was therefore responsible for all policy that followed. That is an absurd argument. The point about the nature in which the agency contract was set up should have been put forward. The hon. Gentleman mentioned the problems he had with setting the regulator up under his no doubt wise stewardship of the Ministry.

Mr Richard Page (South West Hertfordshire, Conservative)

On hearing what the hon. Gentleman says, I think that there is not much difference between us. If there is regulation on the face of the Bill, the regulator will have clear guidance on what to do. The hon. Member for Brighton, Kemptown has already made the point that the regulator has had a one-club policy—consumer prices. That policy has been effectively pursued, but at an unsatisfactory cost down the distribution chain. That was fine for the distribution companies that also had a generator, because they could duck shove costs between the two. They could ensure that they made money at the distribution end while screwing prices down at the production end to the huge detriment of British Energy, which did not have a distribution chain. The wheel turned in a cycle and the Government had to provide a lot of money to bail out British Energy, which was put in a position that it would not have been in if the regulator had had proper policies. The hon. Member for Milton Keynes, North-East is nodding, which means that he is getting into serious trouble, but I am glad to have his support because he has enormous technical knowledge on the subject.

I congratulate the hon. Member for Brighton, Kemptown. I would like his amendment to be accepted, but it would bring responsibilities and liabilities for the Secretary of State, and the Minister would not wish to accept any responsibilities, liabilities or duties from which he could not escape. I would be delighted to be wrong. I would apologise to the Minister, for whom the Post Office is another

successful part of his portfolio, for making uncomplimentary remarks. I would be as humble as possible, but I fear that that will not be the case.

Mrs Anne McIntosh (Shadow Minister, Environment & Transport; Vale of York, Conservative)

I am delighted to see you in the Chair, Mr. Sayeed. Unlike the hon. Member for Southampton, Test, I did not spend most of last week in a darkened room. I was out and about, communicating with the electors for a certain event that will take place this Thursday.

I shall confine most of my remarks to the clause stand part debate, but I congratulate the hon. Member for Brighton, Kemptown on the eloquence with which he moved the amendment. Uncommonly, I find myself agreeing with it in large part. I also agree with the hon. Member for Milton Keynes, North-East. He and I had the pleasure and privilege of serving on the Committee that considered the Office of Communications Act 2002, which introduced Ofcom. We considered the role of the regulator. In hindsight, we can see the importance of what was not included in that legislation, which, like this Bill, gave the Secretary of State undue latitude to proceed through regulations and order in council.

The regulatory impact assessment, which was signed off by the Under-Secretary of State on 19 May, says that chapter 1 of part 3 is needed to provide the regulatory framework for the creation of the renewable energy zones under later clauses. What will the regime be in Scotland? The purpose of the clause is to provide a legal framework, but we are told in a footnote in the regulatory impact assessment that the zone extends beyond the territorial seas of Scotland, Wales and Northern Ireland and is excluded from the devolution arrangements set out in the Scotland Act 1998, the Government of Wales Act 1998 and the Northern Ireland Act 1998.

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

Order. I think that the hon. Lady is addressing her remarks to the wrong clause. I believe that her comments have much more to do with clause 85 than clause 84. If she could make her remarks germane, I would be grateful.

Mrs Anne McIntosh (Shadow Minister, Environment & Transport; Vale of York, Conservative)

Thank you, Mr. Sayeed. I am mindful of your strictures and I shall return to my previous point when we discuss clause 85.

Clause 84 refers to sustainable development. The regulatory impact assessment says that the developers of wind farms will incur the main cost under the clause, but will not other users incur costs? By definition, the term ''sustainable development'', which we will discuss in other clauses, relates to other users of the seas, not just wind farm developers. What consultation has the Minister conducted with the other users in preparing the clause? Did his Department conduct such consultation or was it deferred to other Departments, such as the Department for Transport?

The clause amends section 3A of the Electricity Act 1989. The fee is set at a particular level. Will the Minister confirm that the clause will apply in exactly the same way in England, Scotland, Wales and Northern Ireland? Which Department will be responsible for administering the clause in the whole of the United Kingdom?

Will his Department be responsible for administering it only in England or for applying it in each of the devolved Administrations? We are told in the regulatory impact assessment that the matter is excluded from the competence of the devolved Administrations, which implies that the Department, and the Minister in particular, will be responsible for interpreting the clause. Against that background, it would be helpful to have clarification.

Ms Joan Walley (Stoke-on-Trent North, Labour)

I want briefly to speak because I believe that in considering the issue, it is important for the Minister to tell the Committee exactly how the Government are making progress on sustainable development in relation to the Bill and their wider objectives. I have listened carefully to the debate, and I want assurances from the Minister of where we will be on ensuring sustainable development if clause 84 is deleted.

I have looked again at the regulatory impact assessment and its summary, which has just been drawn to my attention by my hon. Friend the Member for Brighton, Kemptown. On page 30, reference is made to sustainable development, and it is clear that it is a Government objective. As such, I fail to see why that should not be included in the Bill in the duties of the regulator. If we do not do it now, I do not know when we can do it.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I also welcome you to the Chair, Mr. Sayeed.

We have had an interesting debate on the amendments. My hon. Friend the Member for Brighton, Kemptown argued for his amendment on the grounds of challenging Thatcherism and promoting renewable energy, while the hon. Member for Tewkesbury (Mr. Robertson) argued for it on the grounds of advancing Thatcherism and promoting nuclear energy. That illustrates the fundamental problem that there would be in following the amendment's route.

I begin by reminding the Committee, and my hon. Friend in particular, of the background to Ofgem's current principal objective. It has been said a number of times that it goes back 15 years, but it does not, and that is an important misunderstanding. The objective goes back to this Government's Utilities Act 2000. Labour has always taken the view, certainly since the early 1990s, that competition is a good thing. It was clear in our 1997 election manifesto that we wanted to sharpen competition powers and have more effective tools to protect consumers and tackle rip-offs because there have been too many examples of people being ripped off by big companies. We have made it a priority to take steps to deal with that, and we have done that.

The hon. Member for Lewes (Norman Baker) talked about Labour party policies. I remember my right hon. Friend the Chancellor speaking to the Labour party conference in 2002. He made the point that, 10 years previously, he had spoken for the first time as shadow Chancellor and had called on our party

''to adopt a new long term policy for stability and prudence, to be a party of competition and enterprise as well as fairness''.

That was the background to our approach, and it was quickly reflected after the 1997 election in the utilities Green Paper. It reflected the importance of safeguarding the interests of consumers and promoting competition. We invited consultation on that Green Paper and then responded as a Government in 1998 to the proposal that the regulators should have a specific duty by saying:

''The Government confirms that it intends to introduce legislation placing a new single primary duty on the regulators requiring them to protect the interests of consumers, along the lines proposed.''

There was also a reference to competition. That is where the wording that currently applies to Ofgem originates—it did not originate 15 years ago. The same principal objective is included in the legislation that governs Ofcom and Ofwat.

Mr Brian White (North East Milton Keynes, Labour)

The whole debate about utilities revolved around whether sustainability should have been a primary or a subsidiary objective, or whether it should have been in the guidance. Has the guidance that was supposed to guide the regulators actually worked? My contention, which is at the root of the amendment, is that it does not appear to have done so effectively.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I would argue that it has played an important part, although I agree with my hon. Friend the Member for Southampton, Test that we must keep such matters under review and make changes where they are needed, although not on the basis of an amendment in Committee.

Mr Jonathan Sayeed (Mid Bedfordshire, Conservative)

Order. I cannot hear what the Minister is saying, because he is addressing the back of the Room.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I apologise, Mr. Sayeed. I slipped into that habit at our previous sitting, and I shall try to make sure that I do not do so again.

Although there is an interesting discussion to be had about the interaction between regulators and the development of policy, the arrangements are now working well. As part of the process that led up to the White Paper, we concluded that undermining the independence of the regulator by politicising the regulatory process would have serious disadvantages, including, not least, introducing unacceptable levels of uncertainty. My hon. Friend the Member for Southampton, Test made an important point about the danger of handing over to the regulator policy responsibilities that are properly fulfilled by the Government.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

I understand the purist view of the separation of powers between the Government and the regulator, but what is the Minister's answer when that separation does not actually deliver the policies to which the Government are committed?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

My answer is that the policies are being delivered. For example, Ofgem administers very well the renewables obligation that the Government put on the statute book. It is the Government's role to make the policy framework, and it is then the regulator's responsibility to deliver it.

My hon. Friend the Member for Brighton, Kemptown said that there was no confidence in investment in renewables. That would have been a fair comment two or three years ago, but it is not the case today. Substantial sums are now being raised in the City. RWE Energy raised about £400 million in finance for its renewables portfolio, and Centrica is also looking at substantial sums. Momentum is building behind investment in renewable energy, which we all agree is essential for the future.

My hon. Friend spoke eloquently in favour of the amendment, but the biggest problem with it is that it would introduce substantial regulatory uncertainty. That would substantially delay precisely the investment that we all want to see.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

The Minister speaks about the investment that is going into the renewables industry, but when I discussed the issue with Dr. Paul Golby of Powergen, he made it clear that there would be no investment without an incentive to invest. As a free-marketeer, I do not like to say this, but matters cannot just be left to the free market. The Minister is rather making the point of the hon. Member for Brighton, Kemptown.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I am sure that Paul Golby will see the hon. Gentleman's account of that discussion. I should say that I was with Paul Golby just a couple of weeks ago visiting the Scroby sands wind farm in which Powergen has invested. It is just off shore from the constituency of my hon. Friend the Member for Waveney (Mr. Blizzard). Indeed, the turbines were made in his constituency. The investment that we need is now building up. We must at all costs avoid putting at risk the gathering momentum behind investment in renewable energy that we are starting to see at Scroby sands and elsewhere.

Mr Laurence Robertson (Shadow Minister, Economic Affairs; Tewkesbury, Conservative)

I do not deny that the investment is taking place. It is, but it is taking place because of the incentives to make it, which are not simply coming from the free market.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

The hon. Gentleman makes a fair point. We put the renewables obligation in place so that there is a framework to attract that investment. My point is that that is working. I was delighted with the editorial in the Financial Times last week to coincide with the conference in Bonn on renewable energy, which highlighted the attractions of the environment in the UK because of the renewable obligations compared with the mechanisms that are put in place elsewhere. That confidence for investment needs to be secured and maintained and the amendment would do serious damage to it.

Mr Bob Blizzard (Waveney, Labour)

May I underline what my hon. Friend has just said? It is not just Powergen in one isolated instance that is investing in the Scroby sands wind farm. Lowestoft in my constituency is receiving a number of inquiries from other wind energy generation companies that want to invest in offshore wind. That is why we in Lowestoft are calling ourselves Britain's leading edge.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

My hon. Friend makes a telling point on behalf of his constituents. I completely agree. We are starting to see exactly the momentum that we need.

Mr Paddy Tipping (Sherwood, Labour)

The hon. Member for Tewkesbury prays in aid Powergen and, I suspect, other generating companies. But the message that I hear, and I am sure the Minister hears it too, is that they want a secure long-term regulatory framework that they can trust. That is what the debate is all about.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

My hon. Friend is absolutely right. Everyone I speak to about this wants stability in the environment without a sudden shift of the goalposts, which the amendment would bring about. There was an exchange between the hon. Member for Salisbury (Mr. Key) and my hon. Friend the Member for Brighton, Kemptown about the western isles. I have certainly not given up the hope that there will be the potential to secure a substantial renewable energy contribution from the western isles. We should not give the impression that that hope has gone. It certainly has not in my mind. I believe that the arrangements that we have in place will be able to do that.

Mr Colin Challen (Morley & Rothwell, Labour)

I have heard the assertion made several times this morning that this amendment would reduce the industry's confidence in investing in renewables. Would the Minister flesh out that assertion with some examples of how this would occur? We have already seen how, allegedly, the industry involved in insulation is in a state of turmoil because the Government's targets have meandered all over the place around the 5 megaton target. That is an example of the lack of confidence because of moving targets. The amendment seems to establish a firmer framework for renewables, so would he provide the examples and the details to substantiate his assertion?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

The evidence is in what all those to whom I have spoken are saying about the need for stability in the regulatory and investment environment for energy and renewable energy specifically. That is what we must bring about. As I have explained, the current wording—the principal objective for the regulator—was set out in the Utilities Act 2000 and is reflected in the duties given to other regulators as well. The arrangement is now well understood. In the wake of that, momentum is beginning to build up behind the investment that we need.

If the regulator's principal duty were to change so that it was not to protect customers and promote competition but to promote renewable energy according to the amendment, I am not sure what that would mean for the 80 per cent. or so of electricity

generators' business that can be expected, until 2020, to be in non-renewables. It would be a serious instance of moving the goalposts, and would severely undermine investor confidence just when it is building in the way we all want.

Mr Colin Challen (Morley & Rothwell, Labour)

Does my hon. Friend agree that perhaps that moving of the goalposts would increase investors' confidence that the market would be led in a certain way? Markets are pretty unstable things, and they need Governments to place goalposts and ensure a proper level playing field for the desired kind of investment. I have not heard how this will destabilise the market.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

It would not. The arrangement that has been in place since the Utilities Act 2000 came into force is now well understood. The investment that we need is beginning to be established. It was absent a while ago, but I have given examples of such investment being put in place now. There is one message that I get from every potential investor I talk to, and I spend a fair amount of time talking to potential investors in renewable energy. It also comes out, as my hon. Friend the Member for Sherwood pointed out, in discussions with electricity generating companies. It is that they need stability in the arrangements, to go ahead with the investments that they are planning.

If we were to sweep away at this point the principal objective that has applied to the regulator since 2000 and replace it with something completely different, it would take some years for people to work out what that meant in practice. There would certainly not be investment in the meantime. I strongly urge the Committee not to take that road.

Mr Brian White (North East Milton Keynes, Labour)

The Minister will be aware that some small companies have been severely affected by the regulatory hurdles. How will those start-up companies be able to develop in the stable environment that he describes, which has worked against them?

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

My hon. Friend makes a fair point. There were difficulties for smaller generators because of what happened initially with NETA. As he knows, we have tackled those difficulties and the generators are now showing confidence, too. I was at an exhibition yesterday at the Building Research Establishment where several suppliers were presenting very small-scale solar, wind and other approaches to very small-scale generation. We have changed the renewables obligation by lengthening the period in which supply can be accumulated; that is precisely to make the renewables obligation more accessible to smaller generators than it was at the outset. Such changes present a confident prospect for smaller as well as large generators.

Other issues may also give rise to the need for alterations, but to tear up the principal duty of the regulator and start again would be damaging to smaller generators as well as large ones. We have a strong and compelling framework for the development of renewable energy, including taking powers in relation to transmission charging. My hon. Friend the

Member for Brighton, Kemptown spent some time discussing the transmission charging arrangements, and those are dealt with later in the Bill, which provides for us to take on powers to deal with them.

The momentum that we need is being built, and this is certainly not the point at which to change course. The Committee must consider what Ofgem has said and done lately. Hon. Members who have expressed concerns, which I agree with, about the direction of energy policy will be encouraged by a number of developments on the part of Ofgem. Protecting the environment and sustainable development are not, as one hon. Member suggested, an afterthought. I agree that there has been the perception of a problem in that regard, but it is important that the Committee considers what the regulator is actually doing today.

We can look for examples in the corporate strategy, which was published recently. It was consulted on in a document last year and recently concluded. The chapter on helping to protect the environment states that Ofgem's

''statutory responsibilities include having regard to the social and environmental guidance from the Secretary of State, and to the broader environmental and social policy context in carrying out our work.''

That context includes, in particular, the climate change programme designed to implement the UK's Kyoto commitments and the sustainable development strategy. Ofgem today is clear that those are among its statutory responsibilities in exactly the way that members of the Committee have been calling for.

Mr Norman Baker (Shadow Secretary of State for the Environment, Environment, Food & Rural Affairs; Lewes, Liberal Democrat)

The two things are not quite the same. There is a statutory duty to protect the interests of consumers and there is a duty to have regard to the environment. That is a secondary matter; it is not on the same level as the duty to protect consumers. It is, to use the Minister's word, an afterthought.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

The duty certainly is not an afterthought. It is built into the corporate plan for the organisation over the coming three-year period. It is important that Ofgem is clear that that duty is among its statutory responsibilities, as the Committee would wish.

On a number of occasions, we have been able to pay tribute to the work of my hon. Friend the Member for Milton Keynes, North-East that led to the Sustainable Energy Act 2003. He made the point that that requires Ofgem to undertake regulatory impact assessments, which I agree has been a welcome and important step. In particular, Ofgem must assess the impact of proposals on the environment. Clause 174 of this Bill places a statutory duty on Ofgem to follow the principles of ''best regulatory practice'' when carrying out its functions. It is clear that Ofgem is seized of the importance of dealing with the concerns expressed in the Committee about the environment and sustainable development in a way that is consistent with Government policy. That is the way to take these issues forward.

My hon. Friend the Member for Brighton, Kemptown suggested that Ofgem was not doing much to help renewables. That is not the problem at the moment. The real problem with hitting our targets, which I believe we will hit, is investor confidence, which the amendment would severely damage. However, I can point to many things that Ofgem is doing to assist. I have mentioned that it is administering the renewables obligation and doing so well. In the coming year, it will publish a scheme to incentivise the connection of renewables. It will also publish the distributed generation co-ordinating group's annual report and is working with us to incentivise efficient connection of offshore energy sources to the onshore network. All that is essential to achieving the aims that we all share.

I want to propose deleting clause 84. Our commitment to sustainable development is, as I have been setting out, built into existing legislation.

Mr Brian White (North East Milton Keynes, Labour)

Is my hon. Friend aware that deleting the clause gives rise to the perception that the Government are not serious about the environment? That plays into the hands of our political enemies, who will use it against us.

Mr Stephen Timms (Minister of State (e-Commerce & Competitiveness), Department of Trade and Industry; East Ham, Labour)

I do not think that it does that. The initiative came from Liberal Democrat Members of the other place, and was criticised by the hon. Member for South-West Hertfordshire, although I think that his noble. Friends supported it. We have taken a consistent approach; we have clear commitments and objectives with regard to sustainable development and reducing CO2 emissions, using the existing regulatory foundation for energy policy. I do not agree that we would appear to deviate from our cause if we were to go back to the arrangements that we put in place at the outset. Sustainable development integrates economic, environmental and social policy. The roles of the Secretary of State and Ofgem in relation to social and economic policy are well understood and derive from their primary objective to protect the long-term interests of consumers. That was set out clearly in the debate on the utilities Green Paper.

Let me remind the Committee how the environmental and social domains are embedded in existing legislation, and the extent to which the regulator has acted on them. Both the Secretary of State and the regulatory authority must have regard to environmental matters when carrying out their functions under part 1 of the Electricity Act 1989, a responsibility that extends to both current and future consumers. There was an exchange about the problems that might attach to a particular regulator. That is why we now have a regulatory authority; it has been an important step forward. The duties of the regulatory authority include producing regulatory impact assessments to assess the impact on the environment of the proposals, a duty to promote energy efficiency, and a duty to secure viable and diverse long-term energy supplies.

We have been able, over a substantial period, to set in place an easily understood and effective framework within which we can achieve the objectives for

sustainable development and for renewable energy that everybody on the Committee has supported in the debate. The last thing that we should contemplate doing is ripping out the cornerstone of the arrangements and saying that we want to do something completely different. Rather, in the months ahead, we should ensure that, if we need to make alterations, we could do so in the confidence that the foundations that we have put in place are effective.

Dr Desmond Turner (Brighton, Kemptown, Labour)

I am deeply disappointed by my hon. Friend's response. We have common objectives; our disagreement is about whether we have the right legislative framework to achieve them. Let me make it clear that this is not an anti-Ofgem amendment. I would not dare introduce such a thing—the chairman of Ofgem is my near neighbour and I have to live with him. However, I remind the Committee that Ofgem is still somewhat myopic about having security of supply as its primary objective. I do not seek to remove any of the duties of Ofgem. The amendment simply says that Ofgem should carry out its duties in such a way as to facilitate renewable energy.

As to the separation between statute and policy and allowing the regulator to make policy, I must disagree with my hon. Friend the Member for Southampton, Test. He completely misunderstands the situation; the amendment would change the statute from which the authority draws its remit. It is as basic as that.

My hon. Friend the Minister is quite reasonably concerned with stability when it comes to people actively wanting to invest in renewable energy. I totally agree, but I reinforce what I have said about the present lack of investor confidence. The Minister told us about the investment of several hundred million pounds in offshore wind power, but that is happening only because he is helping it along with the leverage of £117 million of capital grants. It means that the renewables obligation is only just effective enough to make an onshore wind farm commercially viable; it is not enough on its own to make offshore wind commercially viable. It is certainly nowhere near enough to bring any of the new technologies into initial deployment. We shall need those technologies if we are to achieve the overall policy objectives, on which there is complete agreement in the House, and certainly within this Room.

I am extremely disappointed that my hon. Friend the Minister wants to delete clause 84. The DTI's regulatory impact assessment on the clause states:

''The Government is committed to sustainable development. While economic, social and environmental duties are already in the Electricity Act 1989, this Clause ensures that sustainable development is given its own profile in energy legislation.''

The Department has published a document saying that the clause is good, but the Minister wants to delete it. I am sorry, but the logic of that completely escapes me.

As to the future security of the market, the Minister is worried about moving the goalposts. My assertion is that the goalposts are not in the ideal position. I want them to be placed in the optimum position and kept there. In my submission, the amendment will not weaken existing confidence; it will give confidence where there is none. It will be a powerful signal to the

whole industry that the Government mean business on renewable energy. I apologise to my hon. Friend the Member for Staffordshire, Moorlands (Charlotte Atkins), but given the Minister's response, I am unable to withdraw the amendment. It is too fundamental a point. With great regret, I shall press it to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 10, Noes 6.