Energy Bill [HL]

– in the House of Lords at 8:23 pm on 20th April 2004.

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Votes in this debate

Proceedings after Third Reading resumed.

Clause 82 [Additional functions of UKAEA]:

Photo of Lord Triesman Lord Triesman Lords in Waiting (Whips) 8:35 pm, 20th April 2004

moved Amendment No. 7:

Page 63, line 14, leave out "nuclear pension schemes" and insert—

"(i) nuclear pension schemes; and

(ii) such public service pension schemes as may be approved by the Secretary of State for the purposes of this subsection."

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

My Lords, Amendments Nos. 7 and 8 address the issue that was raised by the noble Lord, Lord Maclennan, on Report. His proposal was that the UKAEA's powers to administer pensions schemes should be widened beyond the extension already proposed by the Government to include not just nuclear pension schemes but public sector schemes in general.

Given the expertise of the UKAEA's Thurso pensions office and subject to appropriate ministerial oversight, we saw considerable merit in his proposal. The Government have therefore tabled these two amendments for noble Lords' consideration. They extend the UKAEA's powers to administer pensions schemes to "public service pension schemes". The terminology used is consistent with the Pension Schemes Act 1993 and the Pension Schemes (Northern Ireland) Act 1993. It would cover, for example, the Principal Civil Service Pension Scheme.

Before being able to administer public service schemes, the UKAEA will need to secure ministerial consent. We will also need to ensure that UKAEA is structured so as to ensure that competition is run on a fair and equal basis. The amendments provide the necessary enabling powers for the UKAEA to enter this market. I beg to move.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, we welcome this extension of the pension rights.

On Question, amendment agreed to.

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

moved Amendment No. 8:

Page 63, line 26, at end insert "; and

"public service pension scheme" means a public service pension scheme within the meaning of the Pension Schemes Act 1993 (c. 48) (see section 1) or the Pension Schemes (Northern Ireland) Act 1993 (c. 49) (see section 1)."

On Question, amendment agreed to.

Clause 85 [Application of criminal law to renewable energy installations]:

Photo of Lord Kingsland Lord Kingsland Conservative

moved Amendment No. 9:

Page 65, line 13, leave out subsections (6) and (7).

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, these amendments return to a matter that we raised on Report about the scope of the criminal law.

Under subsections (6) and (7) of Clause 85, liability may attach personally to the directors and the officers of companies for any criminal offence by their company, whatever its nature, committed on an offshore renewable energy installation or in a renewable safety zone. That applies even where there may be good policy reasons why directors and officers would not otherwise be personally liable.

We support the application of the normal criminal law to renewable energy installations and the area around them and the liabilities of directors and officers that arise under that law. However, we know of no good reason either for creating the difference in approach between the onshore and offshore regimes or for widening the scope of the criminal law.

In our view, the creation of differential criminal law regimes in this manner is inherently undesirable. We need only consider the potential clash between these provisions and any new offence of corporate killing—for example, where the Government propose not to attribute liability to directors—to see how problematic Clause 85, as drafted, really could be.

After further consideration, we believe that the liability of directors and officers that would apply as if the offence in question had taken place within a part of the United Kingdom is adequately covered by Clause 85(1). On this basis, it seems sufficient simply to omit subsections (6) and (7).

The second amendment serves to omit a definition of "director" that appears to have no function if our first amendment is accepted. I beg to move.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, I opposed an equivalent amendment tabled in Committee but, having reflected on the wisdom of the words of the noble Lord and his advocacy this evening, I am prepared to accept these amendments.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, if only achieving success for every amendment were as simple as that. I thank the noble Lord most warmly for his reaction to our amendments.

On Question, amendment agreed to.

Photo of Lord Kingsland Lord Kingsland Conservative

moved Amendment No. 10:

Page 65, leave out lines 33 and 34.

On Question, amendment agreed to.

Photo of Lord Higgins Lord Higgins Conservative

moved Amendment No. 11:

After Clause 89, insert the following new clause—

"LICENCES FOR GENERATING STATIONS

New licences for offshore wind farms shall not be granted until the Secretary of State has commissioned, received and approved a full report on the effects of offshore wind farms on radar, radio and other devices used by vessels for the purpose of navigation and been satisfied that these effects would not compromise safety or arrangements for search and rescue operations."

Photo of Lord Higgins Lord Higgins Conservative

My Lords, in moving Amendment No. 11, I apologise to the noble Lord, Lord Greenway, for the fact that, due to an unexplained breakdown in communications, his name does not also appear above the amendment. We have benefited greatly from his contributions to our earlier debates on these issues.

This amendment and the two following it are all concerned with the effects and dangers of wind farms to shipping. When this matter first came to my attention at earlier stages, I was concerned about the way in which the interests of the shipping industry, but more particularly the safety aspects of wind farms in relation to shipping, had not been adequately considered.

Since then the House has agreed to two amendments which will be important in helping to improve the situation, but it still seems extraordinary to have reached what is known as Round 2 of the allocation of wind farm sites. The Crown Estate has gone ahead with putting forward proposals for sites, some in the Thames Estuary, some outside the Greater Wash and some outside Liverpool, which have progressed to the extent that individual companies have been asked to submit more specific proposals. One would have thought that, in circumstances where the Government are proposing to authorise the establishment of offshore wind farms, the first question would have been, "Where are the shipping lanes?". They could then have sited the wind farms at an appropriate distance away from them. On the contrary, the approach adopted by the Government seems to have been to site the wind farms where it seems most beneficial and to expect shipping to go around them. This seems to me an extremely dangerous approach to the problem.

That brings me specifically to the amendment before the House. One of the considerations which clearly ought to have been taken into account, but appears not to have been considered at all, is the effect that offshore wind farms may have on radio, radar and other devices used by vessels for the purposes of navigation. When we debated this matter at an earlier stage, the Minister made various suggestions, including that we should have discussions. I expressed my appreciation to him for arranging a meeting with him, together with some of his officials.

I turn to the progress that we should make on what seems to be an important point. The effect of wind farms on radar and navigational arrangements is somewhat uncertain; they can affect radar transmissions both from shore to ship and from ship to shore. Even at this stage it is not entirely clear how such interference will take place. Clearly, the establishment of a whole row of turbine pillars is likely to have an effect. I do not believe that the generation of electricity by the turbines is likely to affect radar, although the Minister may care to express a view on that. More particularly, the danger appears to arise from the vanes of the turbines; they may not turn either because there is no wind or because there is too much wind. We are unaware of the effects that that will have on ships' radar. There are very real dangers.

I hope that the Minister will be prepared to accept the amendment in the terms in which it appears in the Marshalled List. It is an extremely reasonable amendment. However, the important point about it is that such studies should be carried out and we believe that the Secretary of State should commission them. In part the funding may come from the deposits that the Crown Estate has already collected from potential developers. My Treasury halo tends to emerge at this stage in the proceedings. More particularly, having reached this late stage in the process of round two proposals, it is essential that one does not go ahead with final consent until we are clear what effect wind farms will have on shipping. If one goes ahead without such clarification, particular licences may be granted to individual contractors and we may find that the dangers inherent in the effects of wind farms on navigation are greater than was believed.

There is much anecdotal evidence to be found from other countries, particularly Denmark or Holland, which already have considerable experience of ships passing near to wind farms. I frequently fly over the approaches to Rotterdam and perhaps some experience can be gained there. One also needs to look at the more specific problems before reaching a final conclusion. I stress that it appears to me that we must get on with this matter. It is extraordinary that we have not already taken this point into account, given that the Ministry of Defence, for example in relation to aircraft, clearly is concerned about the issue.

I am grateful to the Minister for his earlier response, but we have come to the point where clarification is needed. We need to do something to reduce the concern that has been expressed about such dangers. It is true to say that the environmental lobby is increasingly schizophrenic on this issue. While we would all like to see more renewable energy of the type produced by wind farms—I am not against them in principle—there is a problem: if ships have to make diversions or have to queue outside the approaches to ports, additional greenhouse gases may be produced that otherwise would not have been emitted by the vessels.

Against that balance, I see no evidence at all of the Government considering the balance between renewable energy generation and the increased pollution due to the diversion of ships. More particularly, there is a major danger of an environmental disaster in terms of a ship—perhaps a tanker—hitting such a set of obstacles with disastrous effect. Indeed, that might happen not only on one occasion but time and time again unless we are clear that the safety zones around them—and the location of them, in particular—are sufficient to ensure that ships are able to navigate safely past the wind farms.

This is an important amendment. I hope very much that the Government will sympathetically accept it. I beg to move.

Photo of Lord Greenway Lord Greenway Crossbench

My Lords, I support the amendment of the noble Lord, Lord Higgins. I accept his apologies—I think we will blame the mistake on the Recess—but I did have my name down to the amendment at Report stage.

I agree very much with what the noble Lord said. At Report stage, the noble Lord, Lord Davies of Oldham, gave an assurance that he would look further into the matter of interference with marine communications, electronics, radar and so on. I believe that this has already been put in train and that the MCA is carrying out initial "in-field" studies in the vicinity of the North Hoyle wind farm off the north of Wales. The Government have called for consultation with the marine industry—I believe that comments have to be in by the end of next week—and so matters are moving ahead.

One of the arguments that the Government may have against the amendment is that it may unduly delay the process of issuing licences. But if they are getting on with it as quickly as I take them to be, we can get round that problem. There is the added problem of looking into the materials that are used in the construction of the wind turbines. That may also be having an effect on radio communications. Furthermore, we have to look at the cumulative effect. This is important because the wind farms will be built seawards of existing wind farms and the possible very large cumulative effect could increase the risk to navigational aids.

I fully support the amendment. The Government are aware of the problem and I hope that they will look favourably on the amendment.

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, I am grateful to the noble Lord, Lord Higgins, for the way in which he moved the amendment and to the noble Lord, Lord Greenway, for his remarks. As they will recognise, there is not a great deal of difference between the Government's position and the one advocated so ably by both noble Lords.

I gave an assurance at Report stage that the Government would carry out the study mentioned in the amendment, and we stand by that undertaking. As the noble Lord, Lord Higgins, emphasised, it is important that wind farms do not compromise safety by interfering to an unacceptable degree with ship communications systems. The point made in the amendment about search and rescue is of particular importance and well made. Time is often of the essence in search and rescue situations and communications systems obviously must be working to the highest standards in such circumstances.

As the noble Lord, Lord Higgins, indicated, it is important that the Government should draw on international experience. We shall look at Denmark and, as the noble Lord suggested with great emphasis, the Netherlands, both countries having substantial numbers of wind farms in coastal areas. We can also use the offshore wind farm at North Hoyle as a test facility to provide an input into the study.

We see the study as a priority. Where it will go from the initial information-gathering phases is difficult to predict. However, I can assure the noble Lord that the effect of a wind farm on ships' communications systems will certainly be one of the issues which will need to be addressed when the developers of the round two offshore wind farm projects submit their applications for consent as part of the process of considering the impact on marine safety.

I want to give the noble Lord a further assurance that the Government will take into account all costs and benefits with regard to the proposal, so his point about the extra pollution caused by ships having to navigate around wind farms will be taken into account at that stage. That is a point properly made.

We have repeatedly made it clear that consent will not be granted when a wind farm presents a danger to navigation. We do not expect that the first applications for consent will be submitted until some months from now. That gives us a window in which to complete the study and to consider the outcome.

I hope, therefore, that the noble Lord will recognise that he has made his point. We accept the necessity for the study. We have time to do it, we will draw on international experience, and we will take into account all the factors that he and the noble Lord, Lord Greenway, brought to our attention. If I were pressed on the amendment, I could elaborate about technical difficulties. However, the noble Lord, Lord Higgins, and I are so close in empathy about what should be achieved with regard to action on the round two submissions that I hope he will recognise that I have moved as far as I can without directly accepting the amendment. On that basis, I hope that he will feel that he can take these assurances and will be prepared to withdraw the amendment.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, I thank the Minister for that reply. I am sorry that he cannot simply accept the amendment; I think it would be helpful to have it in the Bill. He has given no reason why he is unable to do so. It is therefore rather tempting to press the amendment to a Division and get it in the Bill, so that we know where we stand. However, I served my apprenticeship in another place under the late Iain Macleod who, in the face of assurances of the kind which the noble Lord has given this evening, said that it was not the policy of the Opposition to shoot Santa Claus. That probably applies in this case. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 93 [Consents for generating stations offshore]:

Photo of Lord Higgins Lord Higgins Conservative

moved Amendment No. 12:

Page 71, line 12, at end insert—

"( ) In section 36(1) of the 1989 Act (consent required for the construction etc. of generating stations) at the end of subsection (1) insert "and such consent shall only be given in relation to offshore wind farms after full consultation with representative bodies of marine users"."

Photo of Lord Higgins Lord Higgins Conservative

My Lords, the amendment would provide that consent required for the construction and so on of generating stations shall be given in relation to offshore wind farms only after full consultation with representative bodies of marine users.

One reason why I have been so alarmed at the way in which these matters have been dealt with hitherto is the extraordinary way in which the Crown Estate in particular and other government departments seem to have pressed ahead in the way I described earlier without consulting the various shipping industries, Trinity House, port authorities, and so on. We are now at a very late stage—we are already through round one of the consultations and there seems to have been remarkably little involvement with interests that might be concerned with safety and navigation. Those sites have actually been given permission, with all the problems to which I referred, particularly the question of whether the ships have to go round the wind farms rather than the wind farms being put out of the way of the ships. The noble Lord, Lord Greenway, and others drew attention at an earlier stage to the very real dangers that could result if those interests were not taken fully into account.

There is also the problem, which has been mentioned in earlier debates, of our international obligations. I find the present ministerial structure overall somewhat puzzling. However, I almost wonder whether one should not appeal to the Deputy Prime Minister, Mr John Prescott, on these issues, considering his long-standing interest in shipping matters. But we really must ensure that these various interests are fully consulted before any further consents are given. I stress the word "consents", because we have already reached the stage at which a diagram has been published by the Crown Estate showing that it has allocated particular sites to particular contractors. However, within those sites there is still the question of the environmental aspects being taken into account and an environmental impact assessment eventually being made.

One thing that has concerned the outside interests is that they have previously not been given full information about what is happening on the grounds of commercial confidentiality, between the Crown Estate on one side and those responsible for the proposals for the development of a particular site on the other. Safety must come first as far as that is concerned. If there are specific proposals, the outside shipping interests should be consulted ahead of any final decision being made. I hope that the Minister will give us a satisfactory reply and assure us that all these problems will be dealt with in future even though unfortunately—and alarmingly in some ways—they have not been dealt with previously. I beg to move.

Photo of The Duke of Montrose The Duke of Montrose Conservative 9:00 pm, 20th April 2004

My Lords, I offer my support to the noble Lord, Lord Higgins, on the matter of consulting fishermen's interests. During the recess, I was talking to a gentleman connected with the fishing industry. He remarked that, as far as he knew, the Government had not conducted any formal consultations with the fishing industry, which the amendment moved by the noble Lord, Lord Higgins, would require. Perhaps this is the time for that consultation to take place, but it would be reassuring to know that the Government were required to carry it out.

Photo of Lord Greenway Lord Greenway Crossbench

My Lords, I support the thrust behind the amendment, but I am bound to say that, as a result of what has already transpired at earlier stages of the Bill, the message has probably got through. There will certainly be much wider consultation with the marine industry for future rounds.

When one looks at the proposed sites for round 2, it is obvious that efforts have been made to try to position these offshore wind farms where they will not have too much effect on shipping. However, as the noble Lord, Lord Higgins, said, there are one or two glaring examples where they have been plonked in almost the worst possible place, where they could not affect shipping more—one in the Thames estuary and one off the Humber. Therefore there must be consultation with the interested marine parties before any licence to develop a site is given.

I take comfort from the fact that the Transport Select Committee in another place is due to examine the whole business of offshore wind farms on Wednesday next week, so further focus will be put on this matter. I support the thrust behind the amendment, but I feel that we have already stirred up enough interest in the subject for the amendment not to be necessary.

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 noble Lord, Lord Greenway, is right. Issues have been raised with sufficient force for the amendment not to be necessary. However, I wish to assure the noble Lord, Lord Higgins, who moved the amendment and the noble Duke, the Duke of Montrose, that all maritime interests will be taken into account. I very much agree that it is vitally important that there is full consultation with the representative bodies of marine users, including fishermen, before a decision is made to grant an application for a Section 36 consent. Best practice dictates that such consultation takes place and that is what happens in practice. I see no real need to formalise that process in legislation. I will try to illustrate how we are consulting. All applications for Section 36 consent for offshore wind farms must be accompanied by an environmental statement. The Secretary of State cannot grant a Section 36 consent unless the applicant has provided an environmental statement that meets the content requirement set out in regulation. The statement must include an assessment of the likely impact of the development on the environment, including direct and any indirect effects.

The aspects of the environment that must be taken into account are wide-ranging and cover not only the impact on the marine environment itself but users of the sea, such as the fishing community, to which the noble Duke, the Duke of Montrose, referred, recreational sailors, whose interests the noble Lord, Lord Greenway, has at heart, and commercial shipping, which the noble Lord, Lord Higgins, has always emphasised in his contributions to amendments tabled in the past.

A proper assessment of the impact of the proposal requires thorough consultation with all stakeholders with an interest. Developers who do not consult properly run the risk that when it is made the application will be rejected by the Secretary of State or Scottish Ministers as inadequate, or that stakeholders will lodge objections to the project. The developers who have been granted site options by the Crown Estate for the second round of offshore wind farms are at the beginning of the process of gathering information for their environmental assessments and preparing their environmental statements.

The department held a preliminary workshop on 12 March to bring together the developers with key government advisers. When a developer applies for consent under Section 36, he must publish notice of the application in local and national newspapers as well as in the London Gazette or, in Scotland, the Edinburgh Gazette. That process formally alerts all interested parties to the application.

It is therefore not necessary to formalise a requirement for consultation because all interested parties will be given an opportunity to make their views known to the Secretary of State or to Scottish Ministers before they take any decision on such proposals. It is clearly in the interests of the developer to undertake such consultations with marine users. Those who do not run the risk that their application may be rejected by Ministers on the basis of a failure to consult relevant interested parties, or may find that formal objections are made to the project.

The amendment focuses on consultation with representative bodies of marine users alone. I understand the proper concerns that the noble Lord has voiced on shipping matters, but the amendment could cause some confusion by giving the impression that consultation is required with marine users but not with other stakeholders. For example, a large number of environment groups have a clear and obvious interest in offshore wind farms.

I hope that I have indicated to noble Lords that we take consultation very seriously. The amendment is more limited than perhaps might be warranted by the number of stakeholders who have an interest in this matter. We intend that all stakeholders should play their part as appropriate in any application. On that basis, I hope that the noble Lord will feel that I have given him the assurances that he required.

Photo of Baroness Byford Baroness Byford Conservative

My Lords, I believe that I heard the Minister say clearly that consultation happens in practice now. However, my noble friend the Duke of Montrose said that the fishermen had not been consulted. I wonder whether the Minister's remarks were relevant to the first wave or the second wave. If one of the major organisations feels that it is not being consulted, that cannot be happening in practice. If the Minister could give us an example, I would be grateful.

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, it is of course the case that we are in the early stage. I can give the assurance that fishermen's interests are taken into account. In fact, they have been present at meetings with the DTI on the whole structure. The noble Duke, the Duke of Montrose, may have met a group of fishermen who have not yet been party to the discussions. It will obviously take some time for the issues to percolate down, particularly with regard to wind farms in particular areas of the country. I seek to indicate, in my admittedly rather general reply, that all those interests are being consulted, and we expect them to be consulted. We cannot conceive of the submission of any application that does not give evidence of the fact that stakeholders have been consulted.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, I am grateful to the Minister for that reply. The noble Lord, Lord Greenway, hit the nail on the head. The reality of the situation is that there was not adequate consultation, as far as one can establish, during round 1. It is really only since these matters have arisen on this Bill that there has been a more positive and active response by the Government regarding consultation. I think that noble Lords should be pleased that they have fulfilled a useful function in that respect.

I understand the point that the Minister made about the narrowness of the amendment. Clearly, it is important that all interested parties should be involved. I hope that environmental groups will take an active interest in the risk of a major environmental disaster compared with what one must say is a somewhat marginal benefit as far as concerns wind farms, given the problems of ship diversion and so on. I hope that they will take that point fully into account and make suitable representations.

I am still somewhat worried about the actual structure. Perhaps the Transport Select Committee in another place might look into this matter. The environmental statement is made by the developer, who clearly has an interest in producing a favourable environmental statement. That is why it is so important that other interests should be considered at an early stage. These interests—shipping, environment and so on—should be very clearly aware of what specific proposal is being made before the Minister considers whether it is appropriate.

The other point that I think is very important is that probably about half of the proposals in round 2 are in areas where a significant number of shipping movements take place and where the location of offshore wind farms could infringe Article 60 of the United Nations Convention on the Law of the Sea. We have not really stressed this point, other than to express concern about the extent to which the Government may be in conflict with their treaty obligations regarding international shipping. In that context, it is important that, in addition to the consultations that we have already discussed, and, as the Minister said, taking as widespread a view as possible, they should also be in touch with the International Maritime Organization, which is conveniently located within walking distance down the road. Its interest should be taken into account.

I do not propose to press this amendment to a Division. I hope that as a result of the debates that we have had on the Bill the Government are now aware that they were failing to consult adequately. We must express the hope that they will consult adequately in future. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Lord Higgins Lord Higgins Conservative

moved Amendment No. 13:

Page 71, line 12, at end insert—

"( ) After the passing of this Act, consents for generating stations offshore shall not be given to applications made under the provisions of the Transport and Works Act 1992 (c. 42)."

Photo of Lord Higgins Lord Higgins Conservative

My Lords, this is a much more technical amendment and it is concerned with the way in which applications are made. As I understand it, it is possible for applications to be made under either the Transport and Works Act 1992 or the Coast Protection Act 1949. I also understand that under round 1 at least half of the farms in territorial waters have been given approval under the Transport and Works Act 1992, even though this tends to be a more expensive way of making an application than if it is done under the Coast Protection Act 1949.

The Transport and Works Act expressly excludes the requirement to obtain consents under the Coast Protection Act. However, unlike the CPA, it does not address dangers to navigation or safety of navigation. Instead, it allows the extinction of public rights of navigation where proposed installations interfere with those rights and could give rise to actions for nuisance.

Consequently, under the TWA, there is no statutory requirement for wind farms causing a danger to navigation to be addressed. The Maritime and Coastguard Agency will be asked to assess draft TWA orders from the safety of navigation perspective and the relevant General Lighthouse Authority may also be involved. However, there is no specific provision that is part of the legal process for giving consent. Therefore, if the Transport and Works Act is used, the important safety issues involved may not be taken into account and, indeed, are effectively avoided.

The absence of a statutory requirement in the TWA route is a serious weakness in the legislative machinery. Many of the possible sites may be in territorial waters. We therefore believe that it is important that future applications should be made under the Coast Protection Act rather than under the Transport and Works Act. The purpose of this amendment is to ensure that that is the case. In our view it is obviously wrong that it should be possible not to take into account fully the aspects that involve the safety of navigation. I beg to move.

Photo of Lord Greenway Lord Greenway Crossbench 9:15 pm, 20th April 2004

My Lords, I should like to support the amendment. I invited the Minister to respond to the matter on Report and he wisely declined that offer. The noble Lord, Lord Higgins, made an important point. There is no doubt that the Transport and Works Act is not subject to the same checks and balances as the Coast Protection Act in this regard. There is a definite lacuna in respect of there being no requirement to address the problems of offshore wind farms causing a hazard to navigation and therefore affecting safety. I very much support the amendment.

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, I wish to give assurances to both noble Lords who have contributed to this short debate, but I also want to express a very powerful argument regarding why we cannot under any circumstances accept the amendment.

I begin with the assurances. The noble Lord, Lord Greenway, drew attention to the fact that I did not fully respond to these issues on a previous occasion. They are technical and I am not sure that I was fully equipped on that occasion to respond to the matter that he addressed. I am rather better equipped to do so today but nevertheless I am inevitably stuck with having to at least attempt to match the technical expertise that the noble Lord, Lord Higgins, has shown.

I believe that a misunderstanding of how navigational safety matters are taken into account under this legislation underpins the amendment. The DTI seeks the views of the Maritime and Coastguard Agency on all applications for a Transport and Works Act order that are made to the Secretary of State. The MCA has been consulted on all the offshore wind farm projects for which TWA orders have been granted so far. The MCA has not maintained an objection to any of those projects. Where the MCA gives its approval subject to certain conditions, such conditions would be taken into account in the TWA order and would be legally binding on the developer and enforceable in the same way as other provisions of the order. I can therefore give the categorical assurance that maritime safety is treated equally seriously whether the developer of an offshore wind farm seeks a TWA order or consent under the Electricity Act and Coast Protection Act. The same degree of concern about the maritime environment applies.

There is a further reason why the amendment would not be acceptable to us.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, my understanding is that the MCA involvement is not legally part of the consent regime under the TWA. The Minister seems to be contradicting that. One or other of us has been wrongly advised. Is he absolutely sure of what he says—that the MCA has the legal right to exercise a veto?

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, I have indicated that the MCA has played its part on all approvals, and that the conditions that it imposes would then be taken into account. They would be legally binding on the developer and enforceable in the same way as the provisions of the order. I am in some difficulty if the noble Lord contends that his understanding of the law is different from mine. I cite it as accurately as I can; I warned the House that we were entering the deep waters of technicality on the amendment.

Let me put the other point to the noble Lord. I am sure that he will take it as seriously as I do, although I might have rather more atavistic reasons for doing so. His amendment would disapply the TWA and, as he will probably recall from an earlier debate, leave the Welsh Assembly Government in a very difficult position. The Assembly Government do not have powers under Section 36 of the Electricity Act, but are responsible for TWA orders for offshore wind farms in Welsh territorial waters. If we disapplied the TWA, as the amendment suggests, the Welsh Assembly Government would have no role in the consent process for offshore wind farms.

I am sure that the noble Lord would not want that to be thrust on the good people of Wales, who have legitimate concerns about the issues as well. At present, the TWA is their only power of defence on the matter. For that reason, I hope that he will accept my assurance on the need to withdraw the amendment.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, can Wales not use the Coast Protection Act 1949?

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, as I understand the position, that is not as effective as the TWA. The TWA is the most effective measure, and the one that Wales has used to safeguard its interests. We have been discussing the TWA in relation to the operation of the Maritime and Coastguard Agency in consultations on all matters that have taken place thus far on wind farm proposals.

I recognise the difficulty that the noble Lord and I have if we are not totally agreed on the law at present. Obviously, I can stand only on the basis of the expertise available to the Government, and the practice that we have followed in phase one of the consents applied. The amendment would certainly leave our Welsh colleagues in real difficulty with regard to control of the situation.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, as has been said—if the House will forgive the analogy—we are in pretty deep waters. My understanding is that the Scottish position is protected. There is alternative legislation in the form of the Private Legislation Procedure (Scotland) Act 1936 and the Robin Rigg Offshore Wind Farm (Navigation and Fishing) (Scotland) Act 2003. I am deficient in advice on the situation in Wales. While I would not regard that as an overwhelming problem, as it could be put right, if necessary, on Report, we are left with a situation where we appear to have conflicting legal views on the issue. On these occasions I look hopefully in the direction of the Box—although I am not sure that I should talk about the people in it as they do not exist in terms of the House.

Photo of Lord Higgins Lord Higgins Conservative

My Lords, I do not even have a box. The Minister has been forthcoming all evening. My initial inclination was to press the amendment to a Division, but that would be difficult when there are conflicting views. We need to be clear, with the good will of the Minister, that if, by chance, he turns out to be wrong and I am right, then it is vital that this matter is raised in another place, the situation clearly explained and the matter resolved.

Obviously, we do not wish to have consents given without the legal position being clear with regard to essential navigational safety considerations or the risk of environmental disaster not being fully taken into account. I hope that all future applications are made in the manner that I have advocated, rather than a roundabout route that presents problems. So, relying on the Minister's good faith that this matter will be clarified—and, no doubt, he will write to us in detail—I shall not press the amendment, although I am tempted to do so. I beg leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 95 [Safety zones around renewable energy installations]:

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, in moving Amendment No. 14, I shall also speak to Amendment No. 51. They are drafting amendments relating to safety zones. They do not alter the meaning of the provisions but merely serve to make the text clearer. I beg to move.

On Question, amendment agreed to.

Clause 106 [Interpretation of Chapter 1 of Part 3]:

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, this amendment and Amendment No. 16, are technical and set out the definitions of the various clauses. They amend the references to simplify the drafting of the Bill. I beg to move.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, I agree that these are simple changes, but can the Minister assure us that an installation will, for the purposes of the Bill, cover renewable energy installations as well as other energy installations? If he could do so, I would welcome the amendments.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, yes. The references are contained within the provisions, where the terms "construction" and "decommission" are also used. So, it is not necessary to double-up on the definitions.

On Question, amendment agreed to.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

moved Amendment No. 17:

After Clause 121, insert the following new clause—

"MERGER OF RENEWABLES PAYMENTS FUNDS

In section 32C of the 1989 Act (payment as alternative to complying with order under section 32), after subsection (3) insert—

"( ) The system of allocation must pool the sums received in respect of supply in all parts of Great Britain and may not distinguish between evidence presented under section 32(3) (obligation in connection with electricity from renewable sources) in relation to England and Wales and such evidence presented in relation to Scotland.""

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, the amendment is intended to require the Secretary of State to pool the renewables buy-out funds in England and Wales on the one hand, and Scotland on the other. Figures recently published by Ofgem have shown that the current system is open to manipulation through the creation and subsequent gaming of material differences in the value of renewable obligation certificates—or ROCs—between the different buy-out funds. For example, a supplier with a large market share in Scotland has been able to under-present ROCs in Scotland, thus inflating the value of the remaining ROCs presented there, and then to use the ROCs that he did not present in Scotland to secure extra revenue by presenting them in England and Wales.

Such a practice constitutes an unfair distortion of trade between industry participants. It also creates unnecessary volatility in the ROC market to the detriment of the achievement of the Government's renewable objectives. Merging the funds is clearly the appropriate way to prevent these difficulties. It can be done without any detriment to consumers and would be a demonstration of the Government's commitment to secure the integrity of the renewables market. It is also something which needs to be addressed urgently, as the failure to correct the problem continues to distort the market.

We know that evidence of the manipulation which I mentioned has been given to government officials. They are aware of the problem. It is therefore time for action to deal with a real problem. I beg to move.

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) 9:30 pm, 20th April 2004

My Lords, I appreciate the way in which the noble Baroness moved the amendment and also the concern that lies behind it: the prevention of any possible gaming by a dominant supplier in one market. That would be fulfilling its obligation in one country by using ROCs while meeting the other, in which it commercially dominant, mainly through paying the buy-out. If that were to happen, such a supplier would reduce the amount of buy-out recycled to its competitors in the market where it complied using mainly ROCs while maximising the amount of buy-out fund available for recycling in the other market. It will be recognised that this is a serious matter. I assure the House that we are keeping a close eye on it. Indeed, we recently received a representation on just this point, and we shall be examining the need for action with Ofgem.

I would emphasise that the issue of a pooled buy-out fund for Great Britain is a key one for the forthcoming review of the renewables obligation. But before decisions can be taken, we need to consider the effect on consumers in the constituent parts of Great Britain, how great these effects would be and how to encompass the new renewables obligation planned for Northern Ireland.

In the meantime, it would be premature, to say the least, to move forward with this amendment when we have not yet carried out a detailed analysis of the effect of such a move on consumers. It is very important that we take the time needed to consider its effects in the round, not merely implement the measure with a limited grasp of the full effects.

Should the amendment come into force at the same time as the rest of the Bill, it would affect the obligation period for 2003–04 for which any payments into the buy-out fund are due on 1 October this year. Suppliers may choose to make their payments before that date. If the amendment were to come into force around late September, that would leave open the distinct possibility of some suppliers deciding to comply early under the existing system and others complying under the new system. To put it at its mildest, that would be a confused and highly undesirable situation.

Furthermore, the amendment would have serious consequences for powers that have previously been executively devolved to Scotland. Fully to achieve the purpose of the amendment of having a single buy-out fund will probably mean the introduction of a single Great Britain-wide obligation, rather than the two obligations we have at present. Taking powers back to Westminster that have already been executively devolved is no light or casual matter.

Therefore, although I feel obliged to resist the amendment, I want to emphasise that we are giving the most careful consideration to this issue in the review of the renewables obligation. It would be possible to take measures that would meet the purpose behind the amendment using secondary legislation and without the need to pull back powers which we have already devolved to Scotland. With a firm undertaking that the issue will be considered fully in the review, and in view of our real awareness of the seriousness of the position, as the noble Baroness indicated in moving her amendment, I hope that she will feel able to withdraw the amendment.

Photo of Baroness Carnegy of Lour Baroness Carnegy of Lour Conservative

My Lords, before the noble Lord sits down, of course none of us wants cheating in the system, but it is very nice to hear the noble Lord defend the interests of Scotland in so far as matters have been devolved hitherto. There could be a distortion in the system if a measure such as that proposed by my noble friend—I know that she has done so in very good faith—was introduced at the wrong moment. Therefore, personally I very much welcome the noble Lord's reply and I am grateful to him.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, I am grateful to the Minister for saying that evidence has been given about this manipulation and that it is a very serious matter which needs to be considered. I shall make only one or two comments. I said very clearly that this proposal could be implemented without any detriment to consumers. That is what the organisation that briefed me strongly on the need for the amendment made very clear. I was surprised to hear the Minister say that we must look into what its effect would be on consumers on the basis that nothing has been done until now.

I heard what my noble friend Lady Carnegy said on this issue and I understand her views clearly. However, the fact remains that at present the system is simply not working. In fact, it is continuing to distort the market and will continue to do so unless something is done about it.

I believe I heard the Minister say that somehow or other this matter can be dealt with by secondary legislation. I wonder how a certain matter can be devolved and then, in a sense, corrected by secondary legislation. Unless I did not hear the noble Lord correctly, it seemed to me that that was the gist of his comments. I want to make it clear that at this stage I have no intention of dividing the House. As the Minister said, the Government take this matter seriously, but I simply want an assurance that they will make an effort to see that it is dealt with in the other place. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

moved Amendment No. 18:

After Clause 122, insert the following new clause—

"COMPLIANCE WITH SECTIONS 32 TO 32C OF THE 1989 ACT

(1) In section 25 of the 1989 Act (orders for securing compliance), in subsection (8), in the definition of "relevant requirement" for "32C" substitute "32D".

(2) In sections 32A(4) and 32A(7) of that Act (orders under section 32: supplementary), (which relate to information powers and other functions of GEMA), at end insert "or to any obligation arising under section 32D".

(3) After section 32C of the 1989 Act, insert—

"32D Prevention and remedying of default in compliance with sections 32 to 32C

(1) An order under section 32 may provide that an electricity supplier must pay such a sum to the Authority, corresponding to the supply of a given amount of electricity by the supplier in a particular period, as may be—

(a) necessary to make good in aggregate so much of any unrecovered default in the payments referred to in section 32C(1) (payment as alternative to complying with order under section 32) by other suppliers in previous periods as may be determined by or under the order; and

(b) determined by the Authority and published at least so long before the start of that period as may be specified in the order;

(2) Any sums received under subsection (1) shall be paid by the Authority to electricity suppliers in accordance with a system of allocation specified in the order.

(3) The system of allocation specified in the order may provide for payments to specified categories of electricity supplier only.

(4) Where the Secretary of State is satisfied that it would be proportionate to do so, and that competition in the supply of electricity would not in consequence be unduly distorted, the order may also make provision as to the form and extent of any measures which a supplier is to take for the purpose of securing its discharge of the renewables obligation.

(5) Without prejudice to the generality of subsection (4), such provision may—

(a) apply only to so much of the obligation as may be determined by or under the order;

(b) include a requirement on electricity suppliers to deposit from time to time with the Authority sums of money, certificates issued under section 32B (green certificates), or other financial security; and

(c) authorise the payment of interest by the Authority on any sums so deposited.

(6) The order may provide that any figures necessary to make or provide for the derivation of any calculation under this section can be estimated by the Authority or the Secretary of State.

(7) This section is without prejudice to the enforcement powers available to the Authority in relation to any provision of section 32 (obligation in connection with electricity from renewable sources) to 32D that is a relevant requirement within the meaning of section 25(8).""

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, I feel like saying, "Here we go again", because I raised this issue in Grand Committee and at the Report stage. On Report, the Minister brought forward amendments relating to the handling of late payments and allowing for shorter obligation periods. However, those would have only the most marginal impact in dealing with the central problem of what happens when a supplier becomes bankrupt. Noble Lords may remember that when I discussed this matter in Grand Committee and on Report I called it "securitisation" on the first occasion and then argued the case equally for "mutualisation", hoping that somewhere along the line a solution could be found.

However, I think it is right to say that, in the absence of further action on this problem, we estimate that the failure of a company of the size of, for example, TXU could, by 2015, lead to a default 10 times bigger than that which arose last year from TXU's bankruptcy.

Such a risk is bad not only for the growth of renewable energy; it is also extremely bad for customers. They are paying extra for their electricity in order to secure the development of renewable energy, but a significant part of those payments is not flowing to renewable generators, simply because of the default risk.

We put forward on Report an amendment, which was designed to resolve that by giving the Government powers to implement either or both of the only two effective ways to deal with the problem. The first was for any uncovered cost to be recovered from consumers as an adjustment to future renewable charges. The second was for the amount of outstanding debt to be reduced through staged payments or by the provision of security.

Either route would involve some cost for consumers, and it is not clear at this stage which of the two would be cheaper. A combination may very well be the best answer. However, both would clearly be a more efficient use of consumers' money in support of renewables than the current system.

The Minister made a number of technical criticisms of our drafting on Report. We have accordingly taken note. We have simplified the amendment and made it more flexible. We have added safeguards to prevent undue distortion of competition. Discussions have been held within the industry in the light of the revised drafting. I am pleased to tell the House, and indeed the Minister, that the consensus that this amendment is the right way forward has been considerably strengthened since the issue was discussed.

On Report, I invited the Government to come back with their own proposals. I think I was a little ruder; I used language like, "Get on with it", which was not terribly parliamentary. I am trying to be more parliamentary at this stage. It did not prove possible, perhaps as a result of the time pressures. But inaction is simply not an option on this matter. It would be absurd to maintain a system with sums of this magnitude owing between commercial entities without any credit management.

The amendment does not commit the Government to specific action but it gives them the powers they need to take the matter forward. Tonight really is our last hope. I invite the Government either to accept our amendment, which is a serious and thought-through policy to resolve this serious problem, or to undertake to take the matter away, perfect the drafting if they think they can and bring it back in another place. I beg to move.

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) 9:45 pm, 20th April 2004

My Lords, the noble Baroness, Lady Miller, has presented these issues both on Report and again today with considerable insight and tenacity. Of course I share with her the concern which lies behind the amendment. I hope that the powers in Clause 117 of the Bill demonstrate our determination and commitment to take measures to address the issue. I shall attempt before I have completed what I think will be a fairly lengthy reply in the face of these real difficulties, to give a positive response by the Government on how we propose to tackle the measure.

I am not sure that it is possible to prevent suppliers defaulting in their payments to the renewables buy-out fund as we cannot prevent companies failing, although clearly we should take all reasonable steps to reduce that likelihood. But all forms of protection for the buy-out fund involve additional costs and we have to consider carefully the balance of costs and benefits. While the measures set out in the amendment would no doubt provide some additional security for the buy-out fund, and in doing so may increase confidence in the market, it would do so—and I emphasised this the last time we debated the issue—at a high cost. There may be additional unforeseen consequences.

I recognise the hard work that has been done by the Opposition, and particularly by the noble Baroness, Lady Miller, in her attempts to produce amendments which tackle this very difficult issue. I want to emphasise that although I shall ask her to withdraw the amendment this evening, we are at one with her about the need to tackle the problem. We are trying to strike the right balance on how the problem can be most effectively tackled.

The amendment essentially covers two options: first, what is termed mutualisation, which is aimed at recovering a shortfall after it has occurred; and, secondly, securitisation, which involves taking steps to prevent such a shortfall occurring. In that context, it may be worth spelling out what we mean by shortfall or deficit in that context. Deficits are in fact lower amounts than expected being paid to holders of ROCs, rather than actual deficits in the usual sense of the word.

Let me address mutualisation first. The first provision in the proposed order requires that electricity suppliers must, in effect, make good previous shortfalls by paying an additional sum over and above their share of the renewables obligation. I am glad that the provision provides for sufficient flexibility so that any such additional sums can cover part or all of the shortfall, as I think that we are all agreed that the default of a very small supplier should not trigger mutualisation. That would mean taking a sledgehammer to crack what is really a small nut. That may also serve to limit the impact of the provision, but it will still mean extra costs. From where is the additional money meant to come? I fear that the only credible answer is that it will have to come from consumers—who are in no way to blame for the shortfall. Is the noble Baroness suggesting that it is right that consumers should foot the bill for such costs?

We have always made it clear—including in the energy White Paper—that our renewables targets are subject to the costs being acceptable to the consumer. To require consumers ultimately to fund deficits in the buy-out fund subjects them to an ever-increasing liability for costs. We should not depend on consumers to bear the cost of such shortfalls.

There must also be some doubts as to whether the amendment would achieve its basic aim of providing a greater level of confidence in the renewables market. There are two possible difficulties. First, the amendment may actually increase uncertainty. Following the failure of a supplier, other suppliers will not know the extent of the additional payment that they will have to make, but they will have that threat hanging over them. That level of uncertainty, together with the prospect of additional costs may, far from increasing confidence for investors, have the diametrically opposite effect.

Secondly, we need to look at the slightly longer term here. When a shortfall occurs, the requirement to make up all or part of the lower than expected fund will inevitably place further pressure on other suppliers. There must be a risk of a further shortfall the following year—the noble Baroness expressed anxieties on that score—consequential to the initial shortfall, and, as a result, greater demands for payments. In fact, we might have a domino effect, and we could be worse off than ever.

In practical terms, that provision of the amendment also involves at least one clear practical problem for Ofgem in determining the amount necessary to make good any shortfall. It is not clear on what basis Ofgem would do that. What would be the extent of any shortfall? There seems to be no legal remit to do that. We should also bear in mind that adding such levels of complexity will inevitably increase the administration costs for all parties.

Under the amendment, an order could also require electricity suppliers to take other measures to secure the buy-out fund where the Secretary of State is satisfied that that will not unduly distort competition—that is the securitisation element. I am glad that the noble Baroness, Lady Miller, acknowledged the implication for competition between suppliers making regular payments on account to cover their share of the renewables obligation. As I understand the provision, that is an attempt to secure some or all of each supplier's share of the obligation in advance. Again, that would certainly provide security but at a high cost.

The proposal increases the upfront costs on electricity suppliers, and there must therefore be a strong risk that those extra costs will fall on consumers. In some respects, that is a greater risk than under the previous provision because with this proposal the additional costs apply whether or not there is a shortfall.

Unlike mutualisation, the Secretary of State cannot wait until a failure occurs before introducing securitisation. It can therefore be likened to an expensive insurance policy—with all insurance policies the cost will depend on the party seeking the cover, with larger, well-established companies tending to have to pay proportionately less. But, as I have just said, I welcome the fact that the amendment recognises and seeks to address the competition implications, which are considerable. How easy that would prove in practical terms—in other words, whether such a scheme can be devised that does not bear more heavily on smaller suppliers and does not act as a barrier to entry into the market—is another question.

I also have concerns about how such advance payments will be calculated, and how the suitability of other forms of financial security, such as letters of credit, will be assessed. That seems to be a potential minefield with ample scope for disputes and challenges. Although the intention, as I understand it, is that the amendment in effect offers the possibility of mutualisation and/or securitisation to protect the buy-out fund, the wording is wide, referring to an order to make provision for any measures on the part of the supplier where the Secretary of State is satisfied that it is proportionate, and that competition will not be unduly distorted. Although the Government appreciate that concept of flexibility, the wording would give a very wide power, with consequent difficulties for Ofgem in assessing whether or not suppliers had made the necessary provision. The regulator cannot be made responsible for ensuring that shortfalls are avoided, which is an impossible task in a market-driven mechanism such as the renewables obligation.

I shall summarise why the Government resist the amendment. First, there are the potential additional costs, which are likely ultimately to fall to consumers; secondly, because there is some risk that such measures could make matters worse, although I accept that the noble Baroness's intention is to improve things; and, finally, because of the practical difficulties in implementation, in particular for Ofgem. In indicating in this protracted reply why we cannot accept the amendment, I emphasise that the Government are neither complacent nor pretending that a further shortfall could never happen. We are concerned that we could be taking powers that make matters worse rather than better whether or not a shortfall occurs. It must be open to question whether the additional costs, in financial terms and impediments to market entry, are justified.

The Government are concerned to provide some additional measures to help secure the renewables buy-out fund. There is a trade-off between achieving a very high level of security while keeping costs to consumers at a reasonable level. For that reason we are examining closely the option of reducing the compliance periods thereby reducing exposure by other suppliers if a supplier were to go into administration. There are added administrative costs for both suppliers and Ofgem in the proposal, but we consider that it is preferable overall to the level of regulation proposed in the amendment. It also strikes a better balance between effectiveness and costs.

We intend to consult this summer, with a view to taking forward the necessary secondary legislation next year. We have already agreed the primary powers for this measure; they are in Clause 117, which, I think the noble Baroness will recognise, is a base on which the issue can be tackled. But we need to get it right. If we produce a remedy that does not measure accurately the costs and benefits, we could end up in a situation even worse than the problem that we propose to tackle. The noble Baroness has assiduously devoted many hours in approaching the matter. She has twice tabled amendments of great importance, which, although I have felt obliged to reject, have prompted us to think very seriously about the issue and how we should respond to it.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, the Minister warned us at the beginning that his was going to be a long answer. Indeed, it was long, but it did not say anything that we wanted to hear. He need not have bothered. It was an appalling answer, because the Minister did not take note of many of the things that I said. There was no point in talking at length about how securitisation might work, or how mutualisation might work, or being flexible. I have argued those, both in Committee at great length and on Report at great length, and I know the pluses and minuses. We did not need to hear all of that.

The last time that we spoke, the Minister said that this would be taken away, and that they were consulting. They have been consulting; they have been consulting; they have been consulting. They cannot even get around to saying that they would be prepared to put something down at some stage during the course of the life of this Bill, when it reaches the other place. He did not take note, he said that it was an enormous cost to consumers—I mentioned that. I said that either route would involve some cost, but that it was not clear to us which route would be the cheaper, and a combination of both might be the answer. Whatever it would be, it would clearly be a more efficient use of consumers' money in support of renewables than the current system, which is absolutely appalling.

This new amendment could be called the middle way—which I would have thought suited the Minister's party. One might have thought that this might be an approach that could be helpful. It so happens that lots of discussions have been held with industry in the light of revised drafting, and the consensus on the amendment, so far as industry is concerned, is that this is the right way to move forward.

I am well aware that the Government have had a strong whip, and they have said that Members must stay until half past ten. I am going to give the Minister some relief that people will not feel that they stayed for nothing. They will at least have a chance to walk through the Division Lobbies. I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 18) shall be agreed to?

Their Lordships divided: Contents, 38; Not-Contents, 68.

Division number 5 Private Parking: Ports and Trading Estates — Energy Bill [HL]

Aye: 36 Members of the House of Lords

No: 66 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Resolved in the negative, and amendment disagreed to accordingly.

Photo of Lord Ezra Lord Ezra Shadow Minister, Trade & Industry 10:07 pm, 20th April 2004

Amendment No. 19:

After Clause 126, insert the following new clause—

"RENEWABLE TRANSPORT FUEL OBLIGATION

(1) In order to comply with EU Directive 2003/30/EC, which requires Member States of the European Union to demonstrate how biofuels are to be placed on their markets in increasing quantities, the Secretary of State may, by regulations, introduce a renewable transport fuel obligation.

(2) Regulations made under subsection (1) may—

(a) require relevant parts of the road transport fuel industry to demonstrate that a specified proportion of their product is renewable,

(b) set targets for the proportion of road transport fuel to be renewable, and

(c) provide for penalties for failure to meet targets.

(3) For the purposes of the obligation, renewable transport fuels shall be defined as liquid or gaseous fuel for transport produced from biomass or other renewable fuels.

(4) The power conferred by this section on the Secretary of State to make regulations is exercisable by statutory instrument subject to affirmative resolution of both Houses of Parliament.

(5) In this section—

"biomass" means the biodegradeable fraction of products, waste and residues from agriculture (including vegetable and animal substances) forestry and related industries, as well as the biodegradeable fraction of industrial and municipal waste;

"other renewable fuels" means fuels, other than biofuels, which originate from renewable energy sources and are used for transport purposes."

Photo of Lord Ezra Lord Ezra Shadow Minister, Trade & Industry

My Lords, this amendment deals with the renewable fuel transport obligation. Like the previous matter, this subject was discussed in Committee and on Report. On both occasions, the noble Lord, Lord Whitty, expressed sympathy with the intent of the amendments, but he thought that they were too precisely drawn. Full account has been taken of his remarks in drawing up the present amendment, which begins by referring to the EU directive and then leaves it open to the Secretary of State to make such regulations as may be required in relation to that directive. I do not think that anything could be more broadly drawn than that.

I hope, therefore, in the light of the real effort that has been made and the discussions which I know have taken place since the Report stage, that the Minister will be prepared to accept the amendment. It should be borne in mind that when the Bill goes to another place, if for any reason a further amendment is made, obviously that would be possible. If necessary, we would be able to consider it again when the Bill comes back to us. On that basis, and speaking briefly given the hour, I beg to move.

Photo of Lord Palmer Lord Palmer Crossbench

My Lords, as usual the noble Lord, Lord Ezra, has given a most succinct introduction to this, our third attempt at trying to persuade Her Majesty's Government to have a renewable transport fuel obligation. As the noble Lord said, an enormous amount of work has gone into the rewording of this amendment since we originally tabled it with all-party support in Grand Committee, where it even seemed to receive tacit support from the noble Lord, Lord Whitty. As always, I must declare an interest as the unpaid president of the British Association for Biofuels and Oils.

It is terribly difficult to find anything new to say on this amendment as the arguments were so well supported in Grand Committee and from all parts of the House at Report stage.

The noble Lord, Lord Dixon-Smith, emphasised the point that if this amendment was accepted we would be talking about a minute percentage of our total fuel requirements, and I think that this is indeed an important factor. Although the amounts of biofuels potentially available may be relatively small, they could nevertheless be significant—5 per cent is certainly achievable; and 10 per cent is a realistic target over time.

For a brief moment I would like to reiterate some of the salient points behind our thinking on this amendment. This amendment could make a major step forward in achieving our national aims for cutting CO2 emissions. It would improve local air quality. It would boost the productivity of our depressed farming sector at an affordable cost. It would give the United Kingdom a degree of self-sufficiency. Surely this must be welcome in the current political unrest in the Middle East. It would make certain that we try not to lag too far behind our European partners, who are currently way in advance of us in terms of technology, usage and of course most importantly, enjoy a much more relaxed tax regime.

I have seldom been involved in a Bill where one particular amendment has such overwhelming support throughout the land, not least of all from another place. The Daily Telegraph recently ran a headline:

"Whitehall warms to 'fuel from crops' initiative".

Only last week, there was a major editorial in Crops Magazine, and I quote:

"The energy time bomb is ticking as predictions for depleting fossil fuel reserves in the North Sea and elsewhere suggest. Government has a real chance to provide the UK with sustainable energy alternatives".

Every countryside body supports this amendment; every farming body supports it; every environmental body supports it, and not surprisingly, all the farming press support it. I really hope that the Government, this time, will embrace this with open arms as it really will be of enormous benefit to our nation.

Photo of Lord Carter Lord Carter Chair, Draft Disability Discrimination Bill (Joint Committee), Chair, Draft Disability Discrimination Bill (Joint Committee)

My Lords, I have put my name to this amendment because I have been involved in Grand Committee and at Report stage. As the Minister knows, we have been trying extremely hard to find an amendment that the Government will find acceptable. Like the noble Lord, Lord Palmer, I declare an interest as the unpaid vice-chairman of the British Association for Biofuels and Oils.

In this amendment we have tried to meet the points that have been made by the Minister. We have included the other renewable fuels and biodiesel. We know that the Government are consulting and when that consultation is over they will have to produce their proposals to meet the directive, which has been mentioned. This amendment provides them with a way of doing that.

I have two quotations. When we discussed this matter at Report stage the Minister said:

"I am open to discussing any alternative amendment that the noble Lord, Lord Carter, or anyone else, brings forward. But anything which appears to drive the Government to one conclusion on this matter would be somewhat difficult. With that qualification, I shall be happy to talk to anybody".—[Official Report, 29/3/04; cols. 1094–95.]

We drafted the amendment expressly so that the Government are not drawn to any one conclusion. I also have a letter from Mr John Healey, the Treasury Minister, to Mr Peter Clery, the chairman of BABFO, which states that,

"the Government remains committed to promoting biofuels, and we are not opposed in principle to some form of biofuels obligation for road transport as this may well offer an effective way of promoting further use of biofuels in the UK. Although we must weigh up the merits of such an approach against other possible options, it could be one of a number of options to help the UK meet the targets we need to set under the Biofuels Directive".

We have drafted the amendment exactly to meet the points made in that letter.

There is one point that has not been raised before and which we believe is important. When the Government reach the end of the consultation and decide to introduce a policy on renewable and transport fuels, how will they do so unless a provision of this nature is somewhere in legislation? I am not clear that they will be able to do so even if they wanted to. I agree that if the Government accept the amendment, it could mean substantial redrafting in the Commons. It is important that there is a provision in the Bill so that if the Government wish to introduce the policy, they have the power to do so. It would be helpful if my noble friend could tell the House, should he decide not to accept the amendment, how the Government would be able to introduce such a policy.

This is the first House to consider the Bill. There will be every opportunity in the House of Commons for the Government to amend and improve this approach if they wish. The amendment is entirely permissive; it does not tie the Government's hands. I hate to say it, but it leaves the Government with the option not to do anything if that is what they choose to do. We, of course, shall be lobbying hard for biofuels as an alternative to be accepted, but the amendment does not tie the Government's hands; it merely provides a means, through legislation, for the Government to act if they wish to do so.

I hope that my noble friend the Minister will be able to accept the amendment as drafted. Then, if the Government wish to amend the drafting or whatever in the House of Commons, they will be free to do so.

Photo of Lord MacGregor of Pulham Market Lord MacGregor of Pulham Market Conservative 10:15 pm, 20th April 2004

My Lords, I shall speak very briefly and follow the good example of others who have spoken before me in so doing. I declare an interest, as I have in earlier debates, as a non-executive director of Associated British Foods, which owns British Sugar.

But it is because of the wider considerations that I support the amendment. I wish to draw attention to the point made very briefly by the noble Lord, Lord Palmer, about its impact on agriculture and the farming community. Indeed, the Minister has been extremely sympathetic all the way through in his response to the general approach. It has been generally agreed on all sides for some considerable time now that one of the ways forward for the farming community is diversification, alternative land use and alternative use of crops. It seems to me that this classically falls into this category.

Given the fact that the sugar regime is due to be amended from 2006 onwards, the possibilities for oilseed rape, for sugar beet, in particular, and for other cereals give farmers considerable cause for hope. I speak as one who comes from a part of the country which has a very strong cereal and sugar beet growing industry. That is one reason why I support the amendment.

The noble Lord, Lord Carter, made a very good point about the legislative opportunities for introducing this subject if it is not done here. If it requires legislation—as I suspect it will—as a small item it is the kind of thing that will get dropped out and not be brought forward as part of a government Bill unless there is another wider opportunity to include it. Here is this wider opportunity. I hope that it will be taken.

Photo of Baroness Byford Baroness Byford Conservative

My Lords, I support the thrust of the amendment. I hope that on this occasion the Government will be able to accept it. As the noble Lord, Lord Carter, said, if they cannot accept the wording of the amendment, perhaps they will accept the thrust behind it and come back with something in another place.

I do not have to declare an interest with regard to BABFO but we do grow sugar beet on the farm in Suffolk.

Looking back on our debates, I should be grateful if the Minister, if he is able, would respond today to the question raised by the noble Lord, Lord Tombs, at Report stage. The noble Lord said that the Minister had commented that,

"it is difficult to tax or apply obligations to overseas-owned companies"— and asked—

"Does he accept that in the electricity renewables obligation we do just that with the French, German and American-owned companies operating in this country?".—[Official Report, 29/3/04; col. 1094.]

I would be glad if the Minister could respond to the noble Lord's question because I have not yet seen a reply.

Other noble Lords have covered the issue in great depth and I shall not delay the House. The Minister has indicated his sympathy all the way through. I believe the trouble has been with the purse strings in the Treasury. We may get a fuller explanation today. I hope that we will hear something positive as this is the last stage at which we in this House can do anything about it.

I am grateful to the Minister and to all noble Lords, who have worked so thoroughly behind the scenes between the various stages. The workings of the House are very important because not everything happens on the Floor of the House; a great deal of pressure is exerted and discussions go on behind the scenes between the various stages.

In supporting the amendment I hope that, if the Government cannot accept it, they will make a strong commitment to the House to look at the issue again before the Bill completes all its stages in another place.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, as I think the House knows—certainly those participating in this debate know it—I have been a strong supporter of biofuels making a contribution to our climate change programme through transport and also as an outlet for the agricultural sector. The biofuels directive, which we very much welcome, gives us the opportunity to look afresh at mechanisms whereby we can deliver a higher proportion of our fuels through biofuels, preferably biofuels which are produced from crops of various sorts grown in this country.

Clearly there is an obligation on us to consult on how we will deliver the biofuels directive. The Department for Transport will be issuing a consultation document on that very shortly. One mechanism that it will propose as an option will undoubtedly be the imposition of a renewables obligation of the sort outlined in the amendment. There will also be other options, but the renewable fuels obligation would be part of that approach and one of the major options to be put before the consultees.

I am gratified that the amendment before us tonight is not the prescriptive amendment that it was at earlier stages, but is more permissive. There are a number of problems about the amendment as it stands. For example, how would it operate in practice? To whom would the obligation apply? What fuels would be covered? How should the scheme be policed and administered? How would companies demonstrate compliance? What would the information requirements be? Would there be buy-outs and trading? The noble Baroness, Lady Byford, raised a point about international companies. How would the obligation operate in such a way as to minimise the obligation being fulfilled simply by imported biofuels or other renewables? That is the point at which, in this context, the international ownership of the oil companies presents a potential problem.

Some of these issues can be dealt with by secondary legislation, but some of them probably ought to be resolved, at least in principle, on the face of the Bill. The current wording would therefore require significant amendment.

I am also mindful of the point made by my noble friend Lord Carter. If, at the end of the consultation, there is solid support for a movement towards an obligation, where are the powers for us to impose such an obligation? If we do not begin to talk about it now, we might have to invent some other vehicle for this.

While it would be true to say that the exact form of the obligation will require some considerable work and probably some more detailed attention at a later stage, in the circumstances, given the widespread support for such an obligation and the timing of the consultation, and on the understanding that what comes out of the Commons may be substantially different from the amendment as drafted, I am prepared to accept the amendment.

Photo of Lord Ezra Lord Ezra Shadow Minister, Trade & Industry

My Lords, everybody will be delighted at what the noble Lord has just said. It will fill all of us with great pleasure, not only those directly involved in the farming community but those involved in energy and energy efficiency who have fought so hard to transform the energy scene. This is an important step forward—it has really made the day for many of us. Other attempts at getting amendments accepted have not been so successful. I thank the Minister as well as the noble Lords, Lord Carter, Lord Palmer and Lord MacGregor, for the part they have played in this. I wish this amendment well when it wends its way through the other place.

On Question, amendment agreed to.

Photo of Lord Ezra Lord Ezra Shadow Minister, Trade & Industry

moved Amendment No. 20:

After Clause 127, insert the following new clause—

:TITLE3:"CHAPTER 5

:TITLE3:CLEAN COAL TECHNOLOGY

PROGRAMME FOR CLEAN COAL TECHNOLOGY

(1) The Secretary of State may by order establish a programme for clean coal technology that introduces demonstration plants for the development of clean coal technology.

(2) Such an order may also set out additional programmes that will facilitate the application of clean coal technology both in the United Kingdom and overseas.

(3) Before making such an order, the Secretary of State shall have regard to the effect of clean coal technology on—

(a) protecting the global environment,

(b) responding to the foresight initiative,

(c) exploiting market potential,

(d) ensuring the security of United Kingdom energy supply, and

(e) maintaining a presence for the United Kingdom in a global energy market.

(4) In this section "clean coal technology" means specified technologies for the generation of electricity from coal that meet specified pollutant emission performance criteria."

Photo of Lord Ezra Lord Ezra Shadow Minister, Trade & Industry

My Lords, this is another amendment that has been through Committee and Report. I have returned to it because of my long association with the coal industry. It relates to clean coal technology. I moved a similar amendment in an attempt to persuade the Government to introduce some form of obligation to stimulate the development of cleaner coal technology. However, it was rejected. Therefore, this amendment, like the previous one, is much more permissive. It follows the lines of what was said to about clean coal technology in the energy White Paper, which indicated that the Government were minded to have a programme for clean coal technology that would lead to the introduction of demonstrator plants.

That is precisely what the amendment proposes. It follows the lines of the White Paper. It is therefore not a new development. It would give great encouragement to the coal industry, which is worried about its future. It would enable us to do a great deal of additional export business through having demonstrator plants showing how this technology could work, as the Energy White Paper indicated. Therefore, I very much hope that, in this revised form, the Minister will be prepared to accept the amendment. I beg to move.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, although I accept that there is an important role for cleaner coal technology, I am afraid that I cannot be quite as helpful on this amendment in its precise form as I was on the previous one. That is principally because, although we are involved in trying to draw up a carbon abatement technology programme for fossil fuel-based power generation—which we are doing in collaboration with the industries and which will build on existing DTI support for cleaner coal technologies—and cleaner coal technologies will play an important part in reducing carbon emissions and maintaining a source of power that minimises those emissions, the amendment relates to the demonstration of cleaner coal technologies and the case for the Government to support a demonstration plant.

Experience around the world, particularly in the United States, suggests that cleaner coal technology demonstrators do not fulfil their objective of moving the technologies into the marketplace. Therefore, in a value-for-money sense, a legal obligation to engage in such a demonstration plant is not a useful option. The Government therefore acknowledge the importance of cleaner coal technology, but the intention that would arise from the amendment is not the most effective way forward. We would rather engage with the industry over the next few months and, indeed, with the noble Lord and others who are interested in this matter to see how cleaner coal and carbon abatement technologies should develop. I am sure that my colleague Mr Stephen Timms at the DTI, the Minister with executive responsibility in this area, would be happy to meet the noble Lord and others to see whether they could take the matter further. However, I cannot accept the amendment.

Photo of Lord Ezra Lord Ezra Shadow Minister, Trade & Industry

My Lords, I find that extremely disappointing. In fact, it seems to go back on what the Government wrote in the energy White Paper, in which they said:

"With this in mind, we have already put in place a programme of support for advanced traditional cleaner coal technologies which is intended to bring forward demonstrator projects that may help to showcase the relevant technology more widely".

That is in cold print in paragraph 6.64 in the energy White Paper.

It seems to me that that is very far away from what the noble Lord, Lord Whitty, has just told us. Is he therefore saying that the Government are going back on the intention so clearly stated in the Energy White Paper? If so, it is an extremely sad day for coal. It is, I would suggest, an extremely sad day for the Labour Party, which traditionally has had the closest possible historic connection with the coal industry. I should have thought that it would have been the first party to have grasped at any way in which the future of coal can be provided for.

I am really disturbed by what the Minister said. He said that he would be open to further discussion, with himself and with Mr Timms. I would certainly like to take that up. However, I want to emphasise that what he has just told us is at extreme variance with what is written in the Energy White Paper. I do not wish to say any more about the matter and, at this late hour, I certainly do not want to divide the House on it, although I would have done so if we had discussed it earlier. I shall take up the Minister's offer of talks. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 151 [Applications for energy administration orders]:

[Amendment No. 21 not moved.]

Clause 153 [Energy administrators]:

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour 10:30 pm, 20th April 2004

moved Amendment No. 22:

Page 117, line 5, at end insert—

"( ) salaries, other contractual terms of employees, and their occupational pension provision, including rights conferred under Schedule 14 to the 1989 Act (the electricity supply pension scheme);"

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

My Lords, I am moving the amendment now because it was not possible for any of the noble Lords who put their name to it to be present to move it at Report stage.

Schedule 14 to the Electricity Act 1989 empowered the Secretary of State to make regulations, which would protect employees then in the industry from detriment in respect of their pension provision. These were enacted as the Electricity (Protected Persons) (England and Wales) Pension Regulations 1990. Similar protection was provided for employees in Scotland under Schedule 15 to the Act and the Electricity (Protected Persons) (Scotland) Pension Regulations 1990. The regulations impose a duty on the relevant employer to maintain or provide its protected employees and protected beneficiaries—together called protected persons—with pension rights, both on an ongoing basis and, in particular, in the event of the partial or total winding up of the scheme; the restructuring or change of ownership of the participating employers; or the transfer of employees from one employer to another within the electricity industry.

This clause appears to lay a duty on the administrator to prioritise the interests of creditors and, subject to them, the interests of members of the company. Through the amendment we are seeking confirmation that the arrangements for a special administration regime do not, and are not intended to, override the statutory duties on employers of protected persons under the Electricity Act 1989. I beg to move.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, I believe that I am able to give such confirmation and confirm that, in the event of a special energy administration, the duties in this respect of employers of protected persons under the Electricity Act 1989 and the protected persons regulations will not be overridden by the duties of the energy administrator. The fact of the company being in administration, whether ordinary or energy administration, will not in any sense terminate the company's duties in this respect. In both cases, the trustees of the pension fund, if the fund is owed money by the company, will be treated as an unsecured creditor of the company.

The provisions of this clause follow the precedent of existing insolvency law, adapting it only where necessary for the purpose of energy administration. Therefore, the rights of employees and pension rights are unaltered as compared with any other administration situation. I hope that that goes far enough for my noble friend to accept it as the reassurance that he sought.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

My Lords, I am glad to have the confirmation on the record from my noble friend the Minister that that is the position. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 167 [Appeals to the Competition Commission]:

Photo of Lord Kingsland Lord Kingsland Conservative

moved Amendment No. 23:

Page 126, line 27, leave out "whose interests are materially affected by it" and insert "who is a party to the document designated pursuant to subsection 2(b)"

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, Clause 167 currently provides that persons who are "materially affected" by a decision of the energy regulator will be entitled to appeal against that decision.

In Grand Committee, and on Report, we argued that the concept of material effect should be changed to the wider concept of sufficient interest. This was not because we wish to enable additional parties to be able to appeal against Ofgem's decisions. It was because we were concerned that, on the test of material effect, there was no guarantee in law that all parties to an industry code would be equally entitled to appeal in relation to an Ofgem decision. We agree with the Government's policy, which is set out in the Bill's Explanatory Notes, that those persons who are able to appeal should include the parties to the relevant codes. However, what is unclear is whether, as a matter of law, all code parties would, in fact, qualify as appellants under the "materially affected" test.

The Minister objected to what he called the "dilution" implicit in our proposed change of test. He feared that this would open the floodgates to appeals from persons whose relationship to a particular code might be indirect or purely tangential. This concern seems exaggerated to us, given that an indirect interest or a tangential interest is by no means the same as a sufficient interest.

In any event, there is an easy way to resolve this matter. That is to ensure, by express drafting, that the parties to the industry codes—in other words, the market participants who are on the receiving end of Ofgem's decisions—are a distinct category of persons who unambiguously have appeal rights, separately from the test applied to other persons. These two amendments achieve this. They provide beyond any doubt that all parties to the industry codes have a right of appeal, while also bringing in as materially affected persons Energywatch and other representative bodies who are not formally parties to the codes.

These amendments should resolve many of the concerns that we have had about the Bill's approach to the test of the right to appeal, while not putting Ofgem's decisions at risk of appeal by persons who have no substantial relationship to the industry codes. On that basis, I find it hard to conceive of any good reason why the Government would not welcome these amendments. I beg to move.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, while we have made a number of amendments in relation to the appeals procedure, we clearly have not swayed the noble Lord's position on this one. I hope that that is not because of some misunderstanding. I accept that he has adapted his amendment in an attempt to address our concern about the use of a sufficient interest test but nevertheless he is persisting in the view that we have too narrow a basis for parties to appeal.

The Government's view is that parties to the code in question will be able to appeal but only provided that they meet the "materially affected" test in particular circumstances. Not all parties to the code will meet that test in every instance and bodies such as Energywatch may be materially affected in certain respects and, although not party to the code, would therefore also be able to appeal certain decisions on the same basis.

The noble Lord's amendment would seem to lead to a situation where all parties to the codes would be able to appeal every decision. The Government cannot accept that outcome. We cannot accept that any legal persons who do not fall under a "materially affected" definition should be allowed to appeal the decision even if they might be party to the code, or if they are not. There are elements within the industry who believe that such a broad basis of appeal should be allowed, but the Government's view—I think that it will be supported by the majority in the industry—is that this would be disproportionate and contrary to the policy of having a fairly tightly prescribed right of appeal.

In our view, therefore, "materially affected" is the right hurdle. This is an important element of the balanced package that is designed to address the concern of the majority of respondents to last year's consultation and provide a degree of certainty and avoidance of delay, whereas the possibility of having a much broader-based threshold of appeal could lead to a flood of appeals which would grind down the whole of the process to no great benefit of the majority of companies involved in the industry. I therefore believe that there is a conflict here, but I am not convinced by the noble Lord's arguments and cannot accept the amendment. I hope that he will not persist with it.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, at this late hour it is rather difficult for me to persist with it. The only way in which I could take my persistence one stage further would be to seek to divide the House tonight; and at a quarter to eleven in the evening I should like to assure the Minister that I have no intention whatever of doing that.

However, as the Minister rightly surmised, I am disappointed in his reply, especially since I believe that it conflicts with the statement set out in the Bill's Explanatory Notes. We have made substantial moves over the three stages of the Bill in your Lordships' House to try to meet the concerns expressed by the Government about our original suggestion of the sufficient interest test. I shall not accuse the noble Lord of churlishness in this matter. However, I think that the noble Lord's approach to our latest amendments is rather harsh.

I hope that, during the gap between the termination of the stages in your Lordships' House and the commencement of the stages in another place, the Minister and his colleagues will think again about this matter. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 24 not moved.]

Clause 178 [Assistance for areas with high distribution costs]:

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

moved Amendment No. 25:

Page 135, line 43, leave out "negative" and insert "affirmative"

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, this amendment is succinct, and the case for making it is also succinct.

On Report, the House agreed to amend Clause 179 to make it subject to the affirmative resolution procedure. Clause 179 enables government to introduce a scheme to subsidise high transmission costs for renewable generation sources in remote areas. The case for this power to be made subject to the affirmative resolution procedure, rather than the weaker negative procedure, was that Clause 179 dealt with more than a narrowly technical matter. On the contrary, Clause 179 is a major departure from normal regulatory practice since it contemplates a new and potentially untransparent subsidy to further the ends of what would otherwise be uneconomic renewable development. Rightly, therefore, this House thought the exercise of such a power should be subject to a level of parliamentary scrutiny higher than that which is available under the negative procedure.

Clause 178 is broadly analogous to Clause 179 in its cross-subsidising effect, as it aims to offset the adverse consequences in Scotland of the abolition of the hydro-benefit subsidy. To that end, under the clause the Government will be able to raise a quasi-taxing levy on the general body of electricity consumers. On that basis, I am sure that the House will recognise that the same arguments that justified the subjection of Clause 179 to the affirmative resolution procedure apply with equal, if not greater, force to Clause 178.

In those circumstances, I hope that the Minister can accept this simple amendment. I beg to move.

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) 10:45 pm, 20th April 2004

My Lords, I am going to disappoint the noble Baroness in everything except being as brief and, I hope, precise as she was in moving the amendment. We of course recognise that the application of the affirmative resolution procedure is appropriate in certain circumstances, but we do not think it right under the clause. The Delegated Powers Committee did not raise any issues on the use of the negative resolution procedure with respect to the scheme.

The noble Baroness helpfully referred to the amendment made to Clause 179, but we also have appropriate precedents and parallels. The negative resolution is provided for under Section 72 of the Utilities Act, which amends the Electricity Act 1989. That enables the Secretary of State to lay an order that, for example, requires the holder of a supply licence to charge uniform prices in a specified area of Scotland. In that respect, there are very clear parallels between Section 72 of the Utilities Act and Clause 178 of the Bill, which seeks to protect customers in the north of Scotland.

We think the negative procedure appropriate. I hope that, in consideration of that parallel, the noble Baroness thinks that the Government are right in this instance.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, my noble friend Lord Jenkin wrote in the Times on 14 April about the unwillingness of the Government to accept perfectly sensible amendments to the Bill. This is such a case. Clearly, I shall not do anything about it at this late stage, but I hope that my colleagues in the other place have a better response than we have just had. After all, the procedure applies to Clause 179, and Clause 178 is broadly similar. In fact, its provisions go even further and ought to be subject to affirmative resolution; there is no case for negative resolution to be used at all. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

moved Amendment No. 26:

After Clause 179, insert the following new clause—

"RESTRICTIONS ON DISCLOSURE OF INFORMATION

In section 105 of the Utilities Act 2000 (c. 27) (general restrictions on disclosure of information)—

(a) in subsection (1)(a) for "or Part I of the 1989 Act" substitute ", Part 1 of the 1989 Act or section 178(5) or 179(5) of the Energy Act 2004"; and

(b) in subsection (3)(a) after "1989 Act" insert ", section 178 or 179 of the Energy Act 2004"."

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

My Lords, the House will recall that we agreed to consider a very similar amendment on the subject after it was put forward by the noble Baronesses, Lady Miller of Hendon and Lady Byford, and the noble Lord, Lord Jenkin of Roding. I should say that I am sorry that he has not been here today to enjoy the final jousting sessions on the Bill. We are grateful to them for raising the issue, and I hope that I have addressed their concerns with a slightly different drafting approach.

The amendment simply provides for the protection of information provided under the hydro-benefit replacement scheme and the adjustment of transmission charges for the renewable generators scheme through the application of Section 105 of the Utilities Act 2000. The addition of the proposed new clause will make it an offence to disclose information provided under the respective schemes, except in those circumstances specified under that section.

Several circumstances would allow for disclosure of information under Section 105 of the Utilities Act; for example, disclosure made with the consent of the individual who is, for the time being, carrying on the business, or disclosure for the purposes of facilitating the performance of any of the functions of the Secretary of State, the authority or the Competition Commission under the 1986 Act, the 1989 Act or the Utilities Act 2000. But in other respects we believe that it meets the substantive objections that were made to the original drafting. Therefore, I beg to move.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Conservative

My Lords, as the Minister said, throughout the discussions on the Bill noble Lords on this side of the House argued strongly for confidentiality and I am pleased to welcome the government amendment, which was tabled in response to our amendment at Report. We thank the Minister for that.

On Question, amendment agreed to.

Clause 183 [Applications of general duties to Part 4 functions etc.]:

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

My Lords, in moving Amendment No. 27, I shall speak also to Amendment No. 28. Both amendments are technical. Amendment No. 27 relates to functions conferred by the Secretary of State or GEMA under Chapters 2 to 4. The amendment makes it clear that these functions will be subject to the principal objectives and general duties set out in the Gas Act 1986. Amendment No. 28 relates to powers in the Bill conferred on the Secretary of State to amend the licence conditions. Clause 184 makes various provisions about those powers, but, as it stands, it is incomplete. Amendment No. 28 corrects that omission and maintains consistency. I beg to move.

On Question, amendment agreed to.

Clause 184 [Supplementary provision about licence condition powers]:

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy)

moved Amendment No. 28:

Page 142, line 33, leave out from "under" to "with" in line 34 and insert "Chapters 2 to 4 of Part 4 of this Act"

On Question, amendment agreed to.

Photo of Baroness Byford Baroness Byford Conservative

moved Amendment No. 29:

After Clause 188, insert the following new clause—

"RENEWABLE ENERGY INSTALLATIONS: DECOMMISSIONING

(1) Where a consent is given under section 36 of the 1989 Act for the construction of a renewable energy installation in—

(a) tidal waters and parts of the sea in or adjacent to Great Britain up to the seaward limits of the territorial sea; and

(b) waters in a Renewable Energy Zone.

The Secretary of State shall, before that consent is brought into force, publish a schedule for the decommissioning of that installation.

(2) Whenever a renewable energy installation, as defined in subsection (1) ceases to be operable for any reason the Secretary of State shall activate the decommissioning schedule unless he considers there are particular reasons not to do so."

Photo of Baroness Byford Baroness Byford Conservative

My Lords, I apologise in advance to noble Lords, because I wish to return to this important amendment, for which I have waited patiently all afternoon and evening.

The passage of the Bill has been, for me, one disturbing revelation after another. According to a Written Answer on 30 January this year by Mr Timms, demand rose by 2.7 per cent per annum in the 20 years from 1982 to 2002. UK supply capacity from conventional sources—coal, oil, our own natural gas, nuclear and hydro—is falling and that will continue for the next 10 or more years. According to my noble friend Lord Gray on 7 January, the 32 per cent of our current supply that comes from coal will be eliminated by 2016 if emission constraints are enforced. He went on to say that by 2020 only one nuclear power station will be operational—and nuclear currently provides 23 per cent of our requirements.

By 2020, at historical expansion rates, demand will have grown from 344 trillion watt hours in 2002 to some 511 trillion watt hours and we shall have lost nearly 50 per cent of our current generating capacity. I have been brought to realise, as have other noble Lords, that if that situation of falling supply and growing demand continues, Ofgem is tasked with holding consumer prices or lowering them even further. Surely that is interfering with market forces and bodes ill for the commissioning of fresh sources of supply. To make matters worse there was a clear indication from the Minister, when challenged by my noble friend Lord Dixon-Smith on 29 March (at col. 1140 of the Official Report) that under present rules climate change levy will be charged to all established sources of supply, including wind farms.

Recent press comments and on the radio, to say nothing of the TV programme, "If . . . the lights go out", have all highlighted Britain's growing dependence on imported fuels, especially coal and gas from Eastern Europe. There has also been informed comment about the intervention by China in the world commodity markets, particularly in coal, iron ore, steel and gas. It is felt that it has already hardened prices and is likely to force them up even further.

But the Government, as we have debated the Bill, will not come off the fence with regard to nuclear production. Until they do, there will be no expansion of it. While no direction is given on the subject, planning even to replace the supplier we are losing is almost impossible.

All this adds up to a desperate, frightening and dangerous scenario. Can the Minister say what powers the Secretary of State can command without having to introduce fresh primary legislation and without having to declare a state of emergency to reduce demand over a period should our supply be jeopardised? Should the gap between the anticipated maximum supply and demand fall to, say, 5 per cent, can he order the population to turn lights off or reduce the domestic use? I am thinking of something similar to the hose-pipe ban brought on in the time of drought.

I think that the Government have to decide whether and how to ensure that wind power will be used as a primary source of supply. One of my fears is that the views in many of our beautiful high areas—miles from off-shore wind—views will be changed by the addition of thousands of wind turbines. My other great fear is that the levels of monitoring and control over that wind farm development are not adequate. Perhaps in some instances greed might triumph over conservation, which leaves groups such as the RSPB, Greenpeace, the WWF and others to highlight the liberties being taken. In such circumstances, I believe that there would be a public backlash against the use of methods which involve heavy engineering in harnessing wind, water and wave power—something we do not want to see.

Radio 4 has run a series entitled "Costing the Earth". On 8 April, the subject was coastal erosion. I understand that the programme reported that we export more than 1 million tonnes of marine aggregate each year to the continental coastal countries which have banned extraction of their aggregates in their own coastal waters because of the effect that is having on coastal erosion. The reason given for the use of our marine rather than land aggregates is, I understand, that it is cheaper and easier to extract from the seabed and because the level of monitoring and control is so much lower at sea. If that is not true, I should be grateful for the Minister to confirm that. It is being suggested and if it is true it is a worrying scenario.

Decommissioning is but one aspect of the off-shore wind turbine business, but the Government refuse to ensure that a would-be developer produces a decommissioning commitment in the form of an approved timetable plan before—and I stress the word "before"—he is granted planning permission. The Government make great play of the current friendly arrangements with those who own or run oil platforms around our shores. However, those companies have been in business for a considerable length of time and have large resources of their own.

In contrast, I understand that much of the finance for developers of wind farms will be from venture capital and the resultant companies will be liable to financial instability. It is possible that they could be. The Bill does not specify the sanctions that will apply to those who fail to implement a satisfactory decommissioning scheme in the event that it is necessary.

The noble Lord, Lord Whitty, wrote to me on 6 April and I am grateful to him. The letter was helpful, but it raised additional concerns which I have raised tonight. In the letter, he said that the relevant consents will contain a condition stipulating that the object in question may not be installed in the sea until such time as a decommissioning programme has been agreed with the Secretary of State. But what is to stop the developer simply getting on with doing it? He has obtained his planning consent, his turbine and his necessary wires and connector and there is a business to go ahead. What is there to constrain him?

The letter also raises an issue discussed in our debate on 23 March at cols. 638–39; that is, the existence of a choice of legislation under which a developer can seek the various approvals that he needs. The implication is that he can get round the less pleasant aspects of this Bill by using another one. I am aware that the Government, faced with amendments voted for in this House, sometimes fail to bring them into force and simply continue to use old legislation as empowerment for statutory instruments.

I feel that the picture that I am painting and, indeed, the response to the noble Lord's letter have highlighted a serious threat. The RSPB particularly raised this issue with me. It says that everything laid down in the Bill leaves both the Secretary of State and the developer with considerable leeway about how open they are about proposals for the decommissioning of installations. I know that the Government are seeking a more flexible process, but what kind of environmental factors and scientific considerations do they envisage could make it undesirable to remove structures from the marine environment once they have reached the end of their operating life?

We spoke about this issue at length during Grand Committee and Report. However, at this stage, I do not believe that the Government have allayed my fears, and that is why I have reintroduced the matter tonight. I apologise for having taken a little while in going through it, but this is the last chance for me to do so in this House before the Bill goes to another place.

I shall be content if the noble Lord acknowledges that I have raised issues that the Government may like to consider further, and I do not intend to divide the House. The noble Lord's letter to me clearly states that the Government have it in mind to ensure that the laid-down regulation will be in place. However, that will be after consent has been given and I do not understand why consent should not be given before the plans are put forward for consideration. I beg to move.

Photo of Lord Whitty Lord Whitty Parliamentary Under-Secretary, Department for Environment, Food and Rural Affairs, Parliamentary Under-Secretary (Department for Environment, Food and Rural Affairs) (Food, Farming and Sustainable Energy) 11:00 pm, 20th April 2004

My Lords, the noble Baroness gave a rather sweeping introduction to the amendment. At one point, I was slightly concerned that she was not speaking to the amendment with which I thought we were dealing. Nevertheless, we have reached the point where I can now relate to the earlier discussion and the correspondence.

My first point is that the noble Baroness's amendment deals with one pattern of consent, whereas our scheme, which is set out in Clauses 107 to 116, gives more comprehensive coverage, dealing not only with the Electricity Act but also with the Transport and Works Act.

Secondly, I shall more or less repeat the words of the letter. In relation to any relevant consent for the renewable energy installation or any related electric line, the object cannot be put in the water until such time as the decommissioning programme has been approved by the Secretary of State. Therefore, the consent is subject to the provision of a decommissioning programme to the Secretary of State. There is no point in looking in detail at decommissioning before the project is consented because that effort will be wasted if the consent is not given. However, the scheme under Clauses 107 to 116 will apply as soon as the project is consented; in other words, the requirement to provide a decommissioning programme will apply prior to that consent being implemented by putting the installation in the water.

Therefore, I do not believe that the spectre that the noble Baroness foresees of people going ahead with building all kinds of horrific things at sea which are not accompanied by a viable decommissioning programme really arises. The amendment as it stands envisages that the Secretary of State must publish a decommissioning programme. As I said, the Bill gives the power to the Secretary of State to require the submission of a decommissioning programme, although that is discretionary. While we expect her to make full use of those powers as a matter of routine, the flexibility is also helpful. But in any case, it is primarily for the person with the consent to produce the decommissioning programme to be submitted to the Secretary of State for her approval. The person responsible for the installation will provide the decommissioning programme, subject to the Secretary of State's approval. So, there are all sorts of problems with the approach suggested by the noble Baroness.

There is a misunderstanding that the consent could be implemented without the decommissioning requirement and also that the amendment would apply to all forms of consent. The amendment is more restrictive than our provision, which includes the safeguards that the noble Baroness seeks. I am quite happy to engage in further discussions. I do not think that her amendment does the job she seeks. The Bill as it stands does it better.

Photo of Baroness Byford Baroness Byford Conservative

My Lords, I am grateful to the Minister and have been throughout. Obviously, he realises that we have genuine concerns and that there is a need to protect the environment. The reason I spread my nets very wide to start with was that the running down of nuclear and the Government's desire to push quickly the growth of wind farms will have huge implications for marine life. We talked about that in earlier amendments, so I shall not go over the ground again. If our demand were going to reduce, then the seriousness of it would not be so great. However, because there will be increasing pressures on this type of energy source in the future, I thought that it was important to spread the net wider.

I do not know much about business, but it seems to me to be an odd way to go about matters for one to get consent and then to come back and justify how one is going to decommission something at the end of the day. But I accept what the noble Lord has said. I also accept if one is not successful in one's bid that one has wasted time. Perhaps I can draw a parallel, which the noble Lord will know well. On the agricultural schemes, which he and I deal with on a regular basis, that is one of the risks one runs. One does a lot of work in trying to put in one's application, knowing full well that one may not actually get it granted anyway. I think the noble Lord knows why I have come that way.

I am grateful to the noble Lord for saying that we can discuss the matter further. The one thing that has come out of the Bill, and which has been highlighted in the amendments today, is the need to have regard also to the marine environment. My noble friend raised the whole question of fishing and of navigation, but certainly the protection of marine environment and our wildlife, which is so dependent on circumstances for future growth, is important. At this stage, I think I will have to say that it is over to my colleagues in another place when the Bill gets down there. I thank the Minister for his response and certainly will come back to him on the issue. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 [The Nuclear Decommissioning Authority]: