New Clause 30 - Duties of the Gas and Electricity Markets Authority towards microgeneration consumers
Climate Change and Sustainable Energy Bill
5:30 pm
Malcolm Wicks (Minister for energy, Department of Trade and Industry; Croydon North, Labour)
The hon. Gentleman might be the future, but it will take some while coming. As I said on Second Reading and on earlier amendments, the Government will not support piecemeal amendments to the principal objective and general duties of Ofgem and the Secretary of State. Regulatory certainty and stability are essential if we are to attract investment into our energy sector.
Although it is for Parliament to set such duties, we would not be acting responsibly if we did not consult properly on such a major change to see how broad and far-reaching any amendments might be. We would want to understand how industry and the regulator might deliver any new duties, given that costs inevitably find their way back to the consumer, whom Ofgem must protect.
The Bill already seeks to amend section 47 of the Electricity Act 1989, which would establish a clear statutory link between Ofgem and microgeneration. At an earlier sitting, I thought that we had reached a consensus that that sent a strong signal from Parliament to the regulator about how important microgeneration is to our energy goals.
Ofgem’s principal objective is clear and gives it clarity and purpose in its decision-making process. Its principal objective is
“To protect the interest of consumers, whenever appropriate through effective competition”,
and we must always remember that the statute describes consumers as both future and existing consumers. That means that Ofgem should not make decisions that discriminate against microgeneration.
Secondary duties require Ofgem to have regard to the environment and the achievement of sustainable development. The Secretary of State also issues social and environmental guidance to Ofgem. That allows it to contribute to broader Government policies without going against the principle of arm’s length regulation. Ofgem has to produce regulatory impact assessments for all its important decisions, and those assessments must include an environmental impact assessment.
Given the benefits that we expect to emerge from an increase in microgeneration, and given Ofgem’s existing duties, I cannot see how microgenerators can be discriminated against. I am not sure whom the new clause would protect by adding the words “in parallel with ... distribution” at a number of points in section 3A of the Electricity Act 1989.
There are two ways in which to operate a microgenerator. The first and most common is to have a microgenerator and a distribution wire. In that way, one’s supplier can provide one with electricity when one’s generator does not deliver the amount that one requires, and the wire can be used to export any unused electricity. In that instance, the consumer is already protected by the current legislation. The second, rarer scenario is that one has a microgenerator and no back-up from the distribution system. In that case, I am not sure what protection the regulator could offer.
I turn now to the suggestion that we amend section 3A(3) by adding
“individuals wishing to generate all or part of their own electricity demands”
to the other vulnerable consumers to whom Ofgem and the Secretary of State must have regard. I hope that the Committee agrees that it is perfectly reasonable to consider the elderly, the sick, the poor and those in rural communities, but that owners of microgenerators do not fit naturally on to that list of vulnerable consumers.
I understand the desire to promote microgeneration, and we are working hard to do so in many areas, but the new clause would not help our cause. I hope that my hon. Friend, having listened to the arguments, will consider withdrawing the new clause.