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Orders of the Day — Electricity Bill

Part of the debate – in the House of Commons at 6:23 pm on 13th December 1988.

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Photo of Malcolm Moss Malcolm Moss , North East Cambridgeshire 6:23 pm, 13th December 1988

It is a rare privilege to follow the right hon. Member for Plymouth, Devonport (Dr. Owen) and I agree with a great deal of what he said. The House should accept his comments, which have been made in a forthright way.

The right hon. Gentleman is right to say that the electricity supply industry has suffered, as have many nationalised industries, from a combination of Government interference, poor accountability and a lack of market discipline. That has led to inefficient investment decisions being taken, for which the customer has had to pay. This Bill is driven by the needs of customers; we must thank the Secretary of State for underlining that fact when drafting the Bill.

There are three essential benefits to the customer. First, there will be competition in generation. As that generation accounts for some 80 per cent. of the price of electricity, any competition introduced at this level must exert a downward pressure on prices.

Secondly, for the first time in this industry, proper regulation will ensure that the benefits from competition will be passed down to customers.

Thirdly, the consumer will be given a new legal status with legal rights and safeguards that will ensure a better service.

While I was researching for this debate, I came across an article written by the hon. Member for Gordon (Mr. Bruce). He was here a moment ago, but has now disappeared. I was pleased to see him return today after having disappeared in high dudgeon last night. The problem was that he did not have time to say everything that he wanted to say. Perhaps I might help him. He wrote in the Liberal News in October of last year: It is impossible to defend the status quo in the electricity industry. The CEGB has become a centralised monopoly which is closed, secretive and accountable to no-one. The economics of generation and conservation are neither being properly examined nor subjected to market forces. The title of the article was Why I shall be buying electricity shares. I could not put it better myself. I agree with everything that the hon. Gentleman has written. I hope that he will come back to make a further contribution tonight.

We have heard from Labour Members more peddling of the myths and misrepresentations that surround the industry. They would have us believe that the electricity supply industry, under its present organisation, has done the best possible job over the past 30 years. They tell us that there is no alternative to a monopoly and to a vertically integrated generation and distribution system and they claim that it gives the best deal to customers. There is nothing to suggest that an industry under national ownership, such as we have had for many years, will keep a downward pressure on prices.

In the years between February 1974 and May 1979, the average annual increase in electricity prices was 22 per cent., a total of 180 per cent. in that period. To tell us that the present nationalised system will give us the best deal is totally unfounded.

Opposition Members tell us that the management of the present system cannot he better. Why, then, does it take 18 years to construct an AGR station? How can we justify a pricing structure of the bulk supply tariff which has led to increased prices to customers? The Energy Act 1983 was designed to open up competition in the industry. It has been a total failure because the percentage of independent generation has gone down since then. The CEGB has protected its monopoly by redefining those "unavoidable costs". In other words, it has upped the fixed price content, which has increased from 1 per cent. in 1983 to about 30 per cent. today. That means that no independent generator can get into the market.

Then, of course, there is the mystique about nuclear power. I find it strange that, at the Sizewell inquiry, the CEGB told us that nuclear power was cheaper than coal. Now, at the Hinkley C inquiry, it appears that that is not correct and that there has been a 180 deg turnaround in that period. I wonder whether that is simply to muddy the water and sway public opinion about privatisation or whether it is a destabilising ploy for the contract negotiations that it is presently undertaking with the area boards.

As the right hon. Member for Devonport said, for the first time nuclear costs will be exposed to scrutiny. They will be clearly identifiable, as they never have been before. It is not true, however, that nuclear power is intrinsically expensive. We must look to better management to reduce costs within the industry. Schedule 12 will bring into the clear light of day the costs of waste, reprocessing and disposal. Any grants will require parliamentary scrutiny and approval. That is hardly the way to keep information from the public. It is hardly the way to fudge the nuclear issue.

There has always been a nuclear cost component to the CEGB's electricity prices. The cost or levy would continue in future irrespective of whether the industry was privatised, and the so-called nuclear tax is not a new tax. Had the industry continued under the present organisation, the levy would be part of the cost component.

The essential questions are, first, who is paying for the back-end cost of nuclear generation? Secondly, who is paying for future unforeseen costs? Thirdly, who covers the cost risk for new nuclear station construction? The consumer has already paid for the back-end costs. I understand that about £3 billion is already in the kitty for the decommissioning of the Magnox stations and to help with the decommissioning of the AGRs. The Government state categorically in the Bill that they will set aside between £1 billion and £2·5 billion to meet unforeseen costs. For the first time, construction risks for new stations will have three-pronged support, from the taxpayer, the consumer through the nuclear levy, and the shareholders.

Nuclear generation is essential from a strategic point of view. Without it, the lights would have gone out during the coal strike and the oil price hike. It is essential for other reasons as well. With Third-world development, there is a tendency to generate electricity from fossil fuels. That technology is easier for Third-world countries to adapt. If we in the developed countries put pressure on fossil fuels, we either price Third-world countries out of generating electricity altogether or drive them to nuclear generation, which we might not want.

There are environmental considerations which, for the first time, begin to make nuclear generation much more attractive than CO2-emitting fossil fuel power stations. Further, the world energy market is shifting towards electricity. Between 1970 and 1984, energy usage overall increased by only 1 per cent. whereas electricity usage increased by 36 per cent. Surely this means that nuclear-generated electricity will move more into its own, and diversity of generation gives balance and security of price and supply.

Nuclear generation is important, but it is not the overriding consideration in the Bill. We heard from the hon. Member for Sedgefield (Mr. Blair) that prices would automatically increase with privatisation, and Opposition Members made light of the fact that new generating capacity is coming forward. We are told that about 20 major companies are making serious approaches to area boards, but I shall give just two specific examples. In the Eastern Electricity region, which covers my constituency, there are five significant new plant proposals, three of which are close to determination. These are combined cycle gas turbine plants of 500 MW capacity, which will be helpful in the further development of North sea gas resources and new fields. In the east midlands area, British Coal is already negotiating with the area board to build fluid gas desulphurisation plants at the pit heads. These plants will produce electricity at a lower price than some of the medium-sized coal stations. The price of coal is already beginning to come down.

The key to the Bill is competition. We must introduce a third force into generation, and the Government must ensure that, in the critical period of negotiation of contracts, the CEGB, with its duopoly inheritance, does not tie up the market and prevent new generators from entering it.