Energy Bill [HL]

– in the House of Lords at 4:07 pm on 30th March 2004.

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Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips) 4:07 pm, 30th March 2004

My Lords, on behalf of my noble friend Lord Whitty, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Triesman.)

On Question, Motion agreed to.

Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

moved Amendment No. 217:

After Clause 156, insert the following new clause—

"EXCLUSION OF CONFIDENTIAL INFORMATION FROM REGISTERS

(1) In section 36 of the Gas Act 1986 (c. 44) (register to be kept by GEMA), after subsection (2) insert—

"(2A) The Authority may enter the provisions of anything in the register in a manner that excludes, so far as practicable, so much of the details of those provisions as it considers it appropriate to exclude for the purpose of maintaining the confidentiality of—

(a) matters relating to the affairs of an individual the publication of which would or might, in its opinion, seriously and prejudicially affect the interests of that individual; and

(b) matters relating specifically to the affairs of a particular body of persons the publication of which would or might, in the Authority's opinion, seriously and prejudicially affect the interests of that body."

(2) In subsection (2) of that section, after "Subject to" insert "subsection (2A) and to".

(3) For section 49(3) of 1989 Act (matters needing to be excluded so far as practicable from register to be kept by GEMA)—

"(3) The Authority may enter the provisions of anything in the register in a manner that excludes, so far as practicable, so much of the details of those provisions as it considers it appropriate to exclude for the purpose of maintaining the confidentiality of—

(a) matters relating to the affairs of an individual the publication of which would or might, in its opinion, seriously and prejudicially affect the interests of that individual; and

(b) matters relating specifically to the affairs of a particular body of persons the publication of which would or might, in the Authority's opinion, seriously and prejudicially affect the interests of that body.""

Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, the aim of the amendment is to deal with a misconsequence in the Utilities Act 2000. A previous provision was interpreted as allowing Ofgem to exclude confidential information from the register which it has to keep under the Electricity Act 1989. The Utilities Act inadvertently repealed that provision, and we are now restoring its effect and extending it to the Gas Act 1986. The amendment aims to reflect accurately what Ofgem is already doing in practice with regard to excluding confidential information from the register. I beg to move.

On Question, amendment agreed to.

Clause 157 [Assistance for areas with high distribution costs]:

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

moved Amendment No. 217A:

Page 120, line 45, leave out "authorised" and insert "relevant"

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

My Lords, the amendments in this group are intended to clarify various aspects of the clause and to ensure that the policy intention of replacing the hydrobenefit licence condition is not undermined by future changes in the electricity market. That will maximise the benefit of the scheme to customers in the north of Scotland.

Amendments Nos. 217A and 217G seek to ensure that the recipient of the assistance under the new scheme is the appropriate distribution network operator rather than a future distribution company which, although operating within the same area, will not face the same costs as the intended recipient.

Amendments Nos. 217B and 217C are required to ensure that the new scheme is passed on to suppliers and does not leak away through future charges to generators. An additional amendment—Amendment No. 217D—ensures that individuals are not required to provide information which they could not be compelled to give in evidence in civil proceedings in the High Court or the Court of Session and which would, for obvious reasons, be inappropriate. Amendment No. 217E will oblige Ofgem to enforce the provision, and Amendment No. 217F has been tabled in order to clarify the meaning of a licence holder in this context.

All that was mentioned in Grand Committee, and it is plainly necessary to make those minor amendments to Clause 157. I hope that they will clarify various aspects of the clause and ensure that the policy intention of replacing the hydrobenefit licence condition is not undermined by future changes in the electricity market. As I said, we believe that that will bring significant benefits to the north of Scotland.

Although we stated in Grand Committee that we thought it might be more appropriate to lay the clause as an amendment to the Electricity Act 1989, I should point out that, having looked at the matter in more detail, we now feel that it should remain a free-standing clause within the Energy Bill. That is simply because there is no logical place to locate the clause within the Electricity Act—a point made to us by one or two noble Lords during the Grand Committee stage—and that is what we are attempting to accomplish.

Perhaps I may respond to a question which I understand the noble Lord, Lord Gray, raised yesterday. I apologise for not having heard him do so but I believe that I am accurately informed that he did. The question that he raised was also the subject of a brief debate. I think I am correct in saying that the noble Lord was referring to the hydrobenefit subsidy when he asked about Scottish hydroelectricity and consumers in the north of Scotland. I am pleased to be able to tell the noble Lord that the Government have no intention of replacing the hydrobenefit licence condition with a levy on consumers in the north of Scotland to the value of £270 million. Indeed, the replacement will benefit consumers in the north of Scotland and will be financed by suppliers across Great Britain. I beg to move.

Photo of Lord Gray of Contin Lord Gray of Contin Conservative

My Lords, I wish to acknowledge the statement made by the Minister regarding the subject that I raised last night. I am relieved to hear that there is no question of those who live in the north of Scotland being asked to contribute directly, according to the rumour that I had heard. I am glad to hear that the Government are not changing their present plan on that. Thank you very much.

On Question, amendment agreed to.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

moved Amendments Nos. 217B to 217G:

Page 121, line 2, leave out "and"

Page 121, line 5, at end insert "and

(c) requires relevant distributors in receipt of a payment under the order to secure, in accordance with the order, that the benefit of the payment is passed to the authorised suppliers supplying electricity in the area of Great Britain in question." Page 121, line 19, at end insert —

"( ) No person may be required under this section to supply information he could not be compelled to give in evidence in civil proceedings in the High Court or the Court of Session." Page 121, line 32, leave out subsection (11) and insert—

"( ) Part 1 of the 1989 Act shall have effect as if every requirement or other duty imposed on a licence holder under this section were a relevant requirement within the meaning of that Part (see section 25(8) of that Act)." Page 121, line 43, at end insert—

""licence holder" has the same meaning as in Part 1 of that Act;" Page 121, line 44, at end insert—

""relevant distributor" means an authorised distributor who distributes electricity by means of a distributions system to which at least 100,000 premises are connected."

On Question, amendments agreed to.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

moved Amendment No. 217GA:

Page 121, line 44, at end insert—

"( ) Section 105 of the Utilities Act 2000 (c. 27) (general restrictions on disclosure of information) shall have effect as if information provided under this section were provided by virtue of the provisions of that Act or the 1989 Act."

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, in speaking to Amendment No. 217GA I would like to mention the identical amendment, Amendment No. 217L. That is an amendment to government Amendment No. 217H, which introduces a new clause after Clause 157. I shall move Amendment No. 217L formally at the appropriate time.

The amendment is purely a drafting or technical amendment to correct what appears to be an anomaly or absence of a necessary consequential amendment. The section we are considering contains provisions enabling the Secretary of State to require certain information to be given to him. That requirement is wholly within the purview of the Bill and not within the purview of either Section 105 of the Utilities Act 2000 or the 1989 Act. Those two Acts provide protection for confidential information received by the Secretary of State in the circumstances laid down in the two well established and well understood Acts.

This is a different concept from the totally distinct issue of protection of legal privilege, which the Government have covered in the Bill. The amendment simply provides that information given under Clause 157 will be treated in the same way as that given under Section 105 of the Utilities Act and the 1989 Act. In due course, if passed, Amendment No. 217H will need to be adjusted in the same way. I repeat that this is purely a drafting amendment with no issue of principle involved. It is proposed only in the interests of consistency, as information given under each of the three pieces of legislation should be treated in exactly the same way, otherwise considerable confusion and disparities might ensue. I beg to move.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips) 4:15 pm, 30th March 2004

My Lords, I am pleased to say that we agree to consider the amendment tabled by the noble Baronesses, Lady Miller of Hendon and Lady Byford, and the noble Lord, Lord Jenkin of Roding. We agree that to protect the confidentiality of information provided under the hydrobenefit replacement scheme, Section 105 of the Utilities Act should be applied. We shall return with an amendment to cover that.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, I thank the Minister for that concession or agreement. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

moved Amendment No. 217H:

After Clause 157, insert the following new clause—

"ADJUSTMENT OF TRANSMISSION CHARGES

(1) The Secretary of State may make an order under this section if it appears to him—

(a) that a particular area of Great Britain is suitable as a location for the generation of electricity from renewable sources;

(b) that, as a result, that area represents an area of high potential for the development of the generation of electricity from such sources; and

(c) that that development is likely to be deterred, or otherwise hindered in a material respect, by the level of charges that would (apart from the order) be imposed by authorised transmitters on persons generating electricity in that area from renewable sources.

(2) An order under this section is one that establishes a scheme which—

(a) limits the amounts of charges that authorised transmitters may impose on persons so generating electricity in that area to amounts determined in accordance with provision contained in the scheme; and

(b) requires the charges imposed by the authorised transmitters on authorised suppliers to be adjusted in accordance with the scheme for the purpose of making good shortfalls resulting from that limitation.

(3) An order under this section establishing a scheme in relation to the generation of electricity from renewable sources in a particular area must specify the area.

(4) For the purpose of facilitating the implementation of a scheme an order under this section may make such modifications as the Secretary of State considers appropriate of the conditions of the licences of authorised transmitters and of authorised suppliers.

(5) For the purpose of carrying out the functions conferred on him by or under this section the Secretary of State may require—

(a) an authorised supplier,

(b) an authorised distributor, or

(c) an authorised transmitter, to supply him, in a specified form and within a specified time, with information of a specified description.

(6) No person may be required under subsection (5) to supply information he could not be compelled to give in evidence in civil proceedings in the High Court or the Court of Session.

(7) Before making an order under this section, the Secretary of State must consult such persons as he considers appropriate.

(8) Subsection (7) may be satisfied by consultation that took place wholly or partly before the commencement of this section.

(9) Where a scheme in relation to the generation of electricity from renewable sources within a particular area is in force, no scheme shall be established in relation to the generation of electricity from renewable sources outside that area.

(10) A scheme shall not be applied in relation to a time more than ten years after the commencement of this section.

(11) A scheme—

(a) shall not be applied for a period of more than five years; but

(b) subject to subsection (10), may be renewed at any time by a further order under this section for a period of no more than five years from the coming into force of the further order.

(12) Part 1 of the 1989 Act shall have effect as if every requirement or other duty imposed on a licence holder under this section were a relevant requirement within the meaning of that Part (see section 25(8) of that Act).

(13) In this section—

"authorised distributor" and "authorised supplier" have the same meanings as in Part 1 of the 1989 Act;

"authorised transmitter" means a person authorised by a licence under section 6(1)(b) of that Act to participate in the transmission of electricity;

"licence" means a licence for the purposes of section 4 of that Act;

"licence holder" has the same meaning as in Part 1 of that Act;

"renewable sources" means sources of energy in relation to which the following condition is satisfied, namely, that the production of evidence in respect of electricity generated from those sources is capable of satisfying a renewables obligation imposed by an order under section 32 of that Act (obligation in respect of electricity generated from renewable sources);

"scheme" means a scheme established by an order under this section.

(14) An order under this section is subject to the negative resolution procedure."

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

My Lords, Amendment No. 217H is a response to an amendment tabled in Committee by the noble Baronesses, Lady Byford and Lady Miller of Hendon, the noble Duke, the Duke of Montrose, and the noble Lord, Lord Gray of Contin. I shall speak also to Amendments Nos. 217HA, 217J and 217K tabled by the noble Lord, Lord Jenkin of Roding, as well as Amendment No. 217L, tabled by the noble Baronesses, Lady Miller of Hendon and Lady Byford, and the noble Lord, Lord Jenkin of Roding.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, perhaps I may make the case for those amendments before the Minister speaks to them.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

My Lords, I shall speak to my amendment and the noble Lord will have a place in the running order to speak to the other amendments. I do not wish to curtail his desire to do that. I was trying to be helpful about the whole group.

The government amendment would provide the Secretary of State with the power to adjust transmission charges for renewable generators within a single area shown to be of high renewable potential where there is evidence that an unadjusted transmission charge might have a material impact on the future renewable build.

The order, if made, could last for 10 years and would be reviewable after five years. The Government would use the power only if there is evidence that it is needed. It would be used to set a threshold and to set a discount on the difference between the threshold and the charge that would otherwise apply. Only renewable generators within the specified area would be eligible for the dispensation.

We tabled this amendment because we believe that it may be necessary to make provision for renewable generators facing the highest transmission charges in the outlying areas of Scotland where there is considerable renewable energy potential. Although the Government are committed to cost-reflecting charging, the fact that the renewables industry is not yet mature means that the impact of high transmission charges could be of concern. The amendment could help to ensure that the Government's renewable targets are not put in any jeopardy. I believe that many noble Lords will agree with us on this point. That was the intent behind Amendment No. 113ZL, which was tabled in Committee.

This may be the moment to pause to hear the noble Lord, Lord Jenkin. I shall then resume the sequence on the other amendments. Otherwise, we may get into a rather confused debate. I beg to move.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

moved, as an amendment to Amendment No. 217H, Amendment No. 217HA,:

Line 39, leave out subsections (7) and (8) and insert—

"( ) Before making an order under this section the Secretary of State must publish a draft of the scheme he is minded to establish, together with an impact assessment of the cost of the scheme including its impact on charges for electricity supplied to customers in Great Britain, and must consult such persons, including suppliers in Great Britain, as will be affected by the scheme.

( ) The Secretary of State must publish, for each year after the making of an order under this section, an annual report on the ongoing costs of the scheme established by the order, including the impact of those costs on the charges for electricity supplied to customers in Great Britain in that year."

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, in moving Amendment No. 217HA, I shall speak also to the other amendments in the group. I am most grateful to the noble Lord, Lord Triesman, for following the more usual practice that the proposer of an amendment may make his case before it is answered.

We first heard of this new subsidy for high transmission costs for renewables in remote areas at the end of an otherwise long speech by the noble Lord, Lord Davies of Oldham, on 12 February. I have to say that from that moment it exploded into an issue of acrimonious public controversy. The Financial Times of 14 February, under the headline, "Regulator hits at subsidies for remote wind farms", stated:

"Ofgem, the energy regulator, has attacked government plans to subsidise transmission costs for wind farms in remote areas as 'unnecessary and misguided'".

Having seen that, I asked Ofgem for a copy of the full statement. I was sent it. I shall quote a couple of brief passages from it. It states:

"To amend the Energy Bill in this way is unnecessary and misguided. It would mean that renewable generators will pay less to transmit their electricity than traditional generators. A great deal is already being done to encourage renewable generation. The Renewables Obligation alone is worth about £45 extra for every megawatt hour of electricity produced. This is providing additional financial support of at least £485 million to the renewables industry this year alone".

It continues:

"There is no evidence that further investment in renewable sources of electricity would result from a further subsidy of this sort".

And then lower down it states:

"If the Government proceeds in this way it will represent an unwelcome move away from the principles of cost-reflective charging for transmitting generation".

At the time I said that I thought it was an almost unparalleled attack on the Government from a regulator. When we raised the issue after the February Recess, the noble Lord, Lord Whitty—I am sorry not to see him in his place—produced a surprising reaction. Although 10 days had elapsed since that first statement was issued, he said:

"The row may have been very public, but until I came into the Room I was not aware of it".—[Official Report, 24/2/04; col. GC 56.]

I hope there are some red faces in the DTI. I fancy that it is one of the major crimes to send a Minister into a debate without having drawn his attention to hostile press criticism.

We then had a letter dated 17 March from the noble Lord, Lord Whitty, in which he explained what the amendment was about. First, he said, as the noble Lord, Lord Triesman, has said, there is an order-making power to "adjust"—that is a weasel word if ever there was one; what they mean is that it is going to "reduce"—the charges that are charged by transmission companies to renewable generators,

"within a single area shown to be of high renewable energy potential and where there is evidence indicating that unadjusted"— that is to say, unreduced—

"transmission charges might materially impact on renewable generation build".

But the noble Lord went on to say:

"The costs resulting from such a scheme would be spread across GB supply companies".

That was his first point.

The second was that much of the detail—as the noble Lord, Lord Triesman, has said—as to how the calculation will be done is not to be included on the face of the Bill. So we have to wait for that. Thirdly, he said that,

"we have not yet concluded on the definite need to exercise this provision, or the exact area to which any provision would relate".

Fourthly, he said,

"that the likely area will be the Highlands and Islands of Scotland".

Fifthly, he said that the order will be subject only to the negative resolution procedure,

"as the measure is technical in nature and relatively narrow in scope".

The fact that it has given rise to such vocal controversy in the press would seem hardly to justify that statement.

So, one has to ask: why is Ofgem so bitterly opposed to what the Government are proposing here? I have a three-page note, but in the interests of trying to achieve our target for the next business, I shall summarise it in five short sentences. First, the transmission charges are and should remain cost reflective; that is to say, the charges should reflect the generators' use of the system.

Secondly, it says that it is important that new generators should face cost-reflective charges. It argues the basic economic arguments that there can then be trade-offs for different costs and benefits; for instance, environmental and economic objectives. A subsidy blunts these economic signals and distorts investment.

Thirdly, it argues that transmission companies estimate that they are already spending about £400 million over three years to accommodate growth in renewables. So, there is already a significant cost to consumers, perhaps of the order of £25 million that would be passed on in electricity charges to consumers. Fourthly, as a result of this DTI proposal, generators in the chosen area will not pay cost-reflective charges while other generators, including renewable generators outside the area, will pay.

Perhaps I may sum up the Ofgem argument as follows:

"With the RO set to generate subsidies in the range of £485 million this year there is no evidence that extra subsidy through capping transmission charges will lead to more investment. It risks promoting an inefficient and uneconomic electricity system".

I find that a very persuasive case. It is the Ofgem case and it needs to be heard. It has one great advantage: cost-reflective charges are open and transparent. It is easy then to calculate what the cost is and how it is passed through to customers' bills.

For those reasons I must say that I was very tempted to oppose this new clause. However, I have also considered very carefully the defence given by the noble Lord, Lord Whitty, in Grand Committee, which has been reiterated by the noble Lord, Lord Triesman, this afternoon. The noble Lord, Lord Whitty, suggested that,

"trade-offs between environmental and economic objectives are ultimately for government and for Parliament".—[Official Report, 1/3/04; col. GC 151.]

I also find that a persuasive argument.

So, the case comes down to our old friend "transparency". If there is to be a subsidy, we must know in advance what it is going to cost; how the cost is to be borne and by whom; and what is the additional burden that will fall on consumers' Bills.

That brings me to my amendments. Amendment 217HA would omit subsections (7) and (8) of the Government's amendment, which are wholly inadequate for the purposes I have outlined. It would impose on the Government instead a duty to publish a draft scheme to include an impact statement about the costs that will be incurred and the impact of those costs on charges to consumers, and then to consult the people affected, including suppliers, on the draft scheme. The second paragraph of the amendment states that there should be an annual report on the ongoing costs, including the impact on consumers' charges. That seems to me to be the least that is required if we are to have transparency about the new subsidy.

Amendment No. 217J is probing: to ask whether the Government are really expecting to use the power only once; whether there will be only one area, the Highlands and Islands, and, if so, why.

I tabled Amendment No. 217K because I believe that this scheme must be subject to proper parliamentary approval and that that requires an affirmative, not a negative procedure. This is not a narrow technical issue, as was stated in the letter from the noble Lord, Lord Whitty, of 17 March. It is a major departure and, as such, when the scheme is proposed it should be subject to the affirmative procedure. I need not mention Amendment No. 217L, which has already been spoken to by my noble friend Lady Miller of Hendon.

This is a new and self-evidently controversial subsidy. Before we can accept the new clause, we must ensure transparency and consultation, especially on costs; we must ensure that there are regular statements about the cost to the consumer; we must safeguard confidential information; and the scheme must be subject to the affirmative procedure. I beg to move.

Photo of Lord Tombs Lord Tombs Crossbench 4:30 pm, 30th March 2004

My Lords, I thank the noble Lord, Lord Jenkin, for introducing the amendment, with which I wholly agree. The government amendment would add a capital grant to a particular scheme, which is not what the renewables obligation is about, it is about supplying a given or projected number of renewable units. To that extent, it is contrary to the renewables obligation.

I took particular exception to subsection (8) of the government amendment, which provides that consultation,

"that took place wholly or partly before the commencement of the section", would suffice. That is wholly wrong for any scheme as dramatic as this. Unusually—for the first time in my experience—I agree with Ofgem. That may be as welcome to it as it is to me. It has it right: it is quite wrong to use such a device to further the ends of what would otherwise be uneconomic renewable development—uneconomic, that is, given the level of subsidy provided for all other forms of wind and other renewable generation.

The Government obviously feel some unease, because they have tabled a sunset clause for 10 years and provided for a review at five years. The Minister is seeking to tread in areas in which he has little confidence and is using a sledgehammer to take the power to crack a hypothetical nut. If the nut exists, which is far from certain, it ought to be dealt with by proper consultation and by bringing a measure before the House. I support the amendment.

Photo of Baroness Carnegy of Lour Baroness Carnegy of Lour Conservative

My Lords, an enormous sum of money is at stake here that will be paid for by consumers of electricity. Should such a sum be added to income tax, there would be outrage, but the Minister suggests introducing the scheme by negative resolution and an order. That is my objection, laudable as it is for those who want to generate in the Highlands and Islands in that way. So my noble friend's amendment is highly desirable.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, I definitely support my noble friend's amendment. He has explained it extraordinarily well. We are in a difficult position and I listened carefully to what the noble Lord, Lord Tombs, said about the main amendment, Amendment No. 217H. I also take the point made by my noble friend about what appears to be government policy. I have taken soundings around the industry and it is not upset about it. The industry is relatively satisfied with the amendment and those in Scotland feel that it would be a disaster if it were not placed on the statute book.

I do not want this to sound like a threat, because it is not meant to be but, having said that, I should find it practically impossible to support the government amendment without my noble friend's amendment to it. Because the issue is so complicated; because the sums of money involved are so great; because the scheme runs counter to everything we have ever believed in about charges being cost-reflective, and so on, it is only right that it should be transparent. The Government are obliged to tell us what is necessary. I hope that the Minister will agree, but in my opinion he should be pleased and want to do that. If not, the scheme is very difficult for us to accept.

As for it being introduced by negative instrument, that would be lunacy—that is not parliamentary language, so I withdraw it immediately; it would be very foolish. This is an important matter that should return to the House for discussion.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

My Lords, a variety of arguments have been adduced during the debate. I must confess immediately that in Grand Committee, I was as surprised as my noble friend Lord Whitty. Although I had caught a glimpse of one article in the Financial Times, eminent newspaper although it is and a great favourite of mine, and was aware that the chief executive of Ofgem had raised the issue that led to that article, it was not immediately apparent to me that there was such widespread disquiet in the industry as has been suggested this afternoon.

Ofgem is an independent regulator and has its role as such, but it is surely the Government's job to take into account wider energy objectives than Ofgem is asked to consider and to legislate if necessary. Those are not the functions of Ofgem. Yesterday, opposition Members moved an amendment to give the Secretary of State power to cap all transmission charges. The Government are taking that power, but only when it is necessary to protect the Government's energy objectives, otherwise leaving charges as set by the National Grid. That is surely the appropriate and proportionate response.

Let me say at once that the Government expect to use that power for only one area, as matters stand. That area is not chosen for random geographical reasons, but because it is characterised by having a high renewables potential and being otherwise liable to be subjected to high transmission charges. In our view, those criteria at present fit only the Highlands and Islands—there may be areas with similar characteristics in the north of Scotland, but we are discussing a fairly circumscribed geographical area because of the criteria, not because of the geography.

If I may say so to the noble Baroness, Lady Carnegy, there is plainly some difficulty in meeting the twin objectives of ensuring that the north of Scotland is not subject to unusually high charges, which most of the residents of that area would find extremely oppressive, but, on the other hand, not making provision that takes account of those requirements. That is why I am slightly surprised by what has been said.

We believe that transmission charging should be cost-reflective, that the scheme should incorporate that aspect, but it will obviously dilute the costs that will be borne by consumers. We think that that is justified where the renewables industry is being established—broadly speaking, it is still in the process of being established; I do not think that anyone could say that it is fully fledged. We think that 10 years is sufficient to enable the industry to become established and do not believe that an ongoing concession on transmission charges should be required. The sums involved are not likely to be very large, as the noble Baroness, Lady Carnegy, fears. It applies only to renewable generators connected to the transmission system not the distributary system, and only in a specified area. It will be recovered from suppliers of Great Britain as a whole, a point that I made in my earlier introduction to the first part of the Government's statement.

I do not intend to make a long statement, but I recognise the seriousness with which some noble Lords have put their points, including the observation by the noble Lord, Lord Tombs, about the rare occurrence of his agreement with Ofgem. I am glad to have been present to celebrate it with him.

Amendment No. 217K produces a scheme, such as that which I have tried to describe, to operate in more than one single area. Amendment No. 217J seeks to make the order effective through an affirmative resolution, as the noble Lord, Lord Jenkin, and the noble Baroness, Lady Miller of Hendon, said.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, the noble Lord has got it the wrong way round: Amendment No. 217J is about the area while Amendment No. 217K is about negative or affirmative resolutions. I just wanted to help the noble Lord.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

My Lords, I appreciate that. All help is gratefully received, particularly in some of these groupings.

The Government have no wish to fast-track proper parliamentary scrutiny where that should occur; it is simply that parliamentary time is finite and the demands upon it great. Although there are no hard and fast rules for the types of orders that should be made through an affirmative or negative resolution, because the measure is technical and relatively narrow in scope—the noble Lord, Lord Jenkin, does not agree with that, but it remains the case—precedent would suggest that the negative resolution procedure is the right level of parliamentary scrutiny for this type of measure. I therefore ask that the amendment be not moved.

In tabling our own amendment which would allow for a dispensation on transmission charges for some renewable generators, we were very careful to ensure that that power would be limited to a single area of high renewable energy potential where transmission charges might have a material impact—as they plainly could, in the north of Scotland—on renewable generation build. I shall not repeat the geographical issues, as those points were made with great power and eloquence in Grand Committee by several noble Lords, including the noble Lord, Lord Gray, when considering the importance of protecting people in the north of Scotland from unreasonable and unrealistic charging. As we said in Committee, our current intention is to specify an area and to meet those concerns. It is right to do so.

It is important that the transmission system is built and charged for in a cost-reflective way. The only legitimate exception to that argument is where that could have a material impact on renewable targets. For that reason, I ask that Amendment No. 217K be not moved.

On Amendment No. 217HA, I welcome the interest that several noble Lords have shown in this regard. We broadly agree with the sentiments expressed; of course the Government must produce a draft proposal on any scheme and consult widely upon it before laying it before Parliament. Equally, the Government will produce a full regulatory impact assessment of the scheme—I give that undertaking. I welcome the intention behind this amendment, but the matter is adequately covered by the government-drafted amendment.

The second part of Amendment No. 217HA, however, would require the Government to produce an annual report on the cost of the scheme to consumers. The cost of the scheme will be set out in the impact assessment. We do not believe that it is necessary to go further and to produce an annual report, as we do not expect the impact on individual customers to vary substantially from year to year. It is worth remembering that the order would be reviewable after five years, at which point the costs and benefits of the scheme will be reviewed. On that basis, I ask that the amendment be withdrawn. I reiterate the point that I made in Grand Committee: the intention is perfectly intelligible but the solution to it is disproportionate.

I shall now respond to Amendment No. 217HL. As in the case of hydrobenefit, we have already considered the amendment, and I undertook, when the noble Baroness, Lady Miller of Hendon, moved the amendment about protecting confidentiality, to consider it properly before the next stage. I thank noble Lords for raising the issue. It fits in particularly well with the set of the amendments that I have addressed.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, I recognise that the noble Lord, Lord Triesman, has done his best to help us. I am grateful for his undertakings about the form of consultation. However, I cannot for the life of me see why he should resist including them in the Bill. This is a new proposal for a new subsidy, and it requires thorough consultation.

The provision that I have set out in Amendment No. 217HA is the minimum that should be required for such an issue. I do not believe that what the noble Lord has said will meet the case. I am sorry that he seems so startled. Does he not recognise that the paper prepared by Ofgem has spelt out some very strong arguments? I was very tempted that we should accept them, but I recognise the point made by the noble Lord today and the noble Lord, Lord Whitty, in Grand Committee that in the last resort it is for government and Parliament to set the balance between economic and environmental objectives. I recognise that the Government are trying to do that, but we need these amendments, or some of them at any rate, written into the Bill. I should like to test the opinion of the House.

On Question, Whether Amendment No. 217HA, as an amendment to Amendment No. 217H, shall be agreed to?

Their Lordships divided: Contents, 146; Not-Contents, 125.

Division number 2

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Resolved in the affirmative, and Amendment No. 217HA, as an amendment to Amendment No. 217H, agreed to accordingly.

[Amendment No. 217J not moved.]

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative 4:57 pm, 30th March 2004

moved Amendment No. 217K:

Line 71, leave out "negative" and insert "affirmative"

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, I beg to move.

On Question, Whether the said amendment (No. 217K) shall be agreed to?

Their Lordships divided: Contents, 136; Not-Contents, 116.

Division number 3

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Resolved in the affirmative, and amendment agreed to accordingly.

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips)

My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.