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Nuclear Power

Part of the debate – in the House of Commons at 9:33 pm on 22nd October 2002.

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Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South 9:33 pm, 22nd October 2002

I declare my interest as a consultant to AEP Energy Services, as set out in the register.

Two dogs have not barked tonight: first, the European Union, and secondly, the role BNFL is playing in market interaction. For the first time, we in this country have a pure market in energy, and the consequences are profound. Since 1998, there has been a 40 per cent. fall in wholesale electricity prices but, tragically, the consumer has not benefited. Ann Robinson, chair of Energywatch, the independent gas and electricity consumer watchdog, said:

XThis long-awaited NETA end of year review fails to answer the questions we have raised about the massive difference between the savings being enjoyed by electricity suppliers as a result of NETA and those being passed on to domestic consumers. The report has done little to alleviate our fears that consumers are being ripped off."

That is the state of play: despite the fall in wholesale electricity prices, the consumer is receiving only about an 8 per cent. reduction.

One of the problems that we face is that, in my judgment, in the vertically integrated players—the generators and the suppliers—there may well be cross-subsidy going on, which is not feeding through to the consumer. I suggest to the Minister that he invite Ofgem to take a much harder look at what the suppliers are doing, particularly the vertically integrated suppliers, and what can be done to generate much more competition between the suppliers so that that can work its way through to the public.

The first dog that is not barking is BNFL. In focusing on British Energy tonight, we are looking at the wrong company. It happens to be the weakest of the companies in the private sector, so it is the first one that hits the stops when the going gets rough in the market. BNFL, owned by the Government, is far more uneconomic. If one draws up a list of the 10 most uneconomic power plants in this country, the five Magnox plants still in operation are Nos. 1, 2, 3, 4 and 5 on that list. That is what is causing the distortions in the market. Under normal circumstances, one would expect those stations to be phased out, but for reasons that we have discussed and for the reason that we have not hit the stops until now, they are being kept open.

Any restructuring of British Energy must take account of the whole market, so the Minister should not be looking just at British Energy—he should be looking at BNFL. If he were to phase out the uneconomic power stations in a sensible way, he would see the price of electricity rising, which would bring the cash back into the market and into the generators, so that alternative forms of energy could be considered, and nuclear and clean coal could become viable options again. However, he must get the price up and get more liquidity and more investment into the market.

The second dog that is not barking tonight is the European Union. I have no doubt that giving state aid to just one company in the market is discriminatory and is distorting the market. I am sure that in the long term that would be in breach of the EU state aid regulations. I appreciate that, in the short term, the Minister is doing the right thing in sorting out the problems, but if there were a long-term package that favoured British Energy against the rest of the market, in my judgment he would fall foul of the EU regulations.

That is not the Minister's fault; he is in a difficult position. He has the White Paper coming up, as well as the shake-out of the market and the problems in the nuclear sector. As other hon. Members have said, the difficulties with gas arise from the fact that from 2006 we will start importing and we do not want excessive reliance on gas. As regards coal, the rules for sulphur and nitrogen emissions will start biting, and unless the Minister can get clean coal technology into place, the coal-fired power stations will run into difficulties, but the market is too low at present, so he cannot get the investment into clean coal technology. As others have commented in respect of renewable energy, the Government will be hard pushed to hit their target of 10 per cent. by 2010. I wish them well in their efforts. The Minister is doing an admirable job in pushing the renewable project as hard as he can, but there are limitations.

Any restructuring must take into account the whole market. My advice to the Minister is to take out the uneconomic plants, let the prices come back up and get the liquidity back into the market.