Energy Bill — Third Reading

– in the House of Lords at 4:03 pm on 19th November 2013.

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Photo of Baroness Anelay of St Johns Baroness Anelay of St Johns Captain of the Honourable Corps of Gentlemen-at-Arms (HM Household) (Chief Whip, House of Lords), Deputy Chairman of Committees, Deputy Speaker (Lords) 4:03 pm, 19th November 2013

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Energy Bill, have consented to place their prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Clause 3: Further duties of the Secretary of State

Amendment 1

Moved by Baroness Worthington

1: Clause 3, page 3, line 39, at end insert—

“(9) Where carbon intensity of electricity generation is reported to have increased year on year for not longer than three consecutive years, starting from the date of Royal Assent, the Secretary of State shall report to both Houses of Parliament, setting out both the reasons for the increase and the additional actions that will be taken to reverse this increase in carbon intensity.”

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

My Lords, during our scrutiny we have come to know this Bill as the “decarbonisation Bill” as it has passed through this House. It has been referred to in that way by a number of noble Lords and it is a reasonable description. The Bill represents a significant intervention in the electricity market that is justified on the basis that it will help to decarbonise our electricity system. Noble Lords will be aware that we have had lengthy discussions about the setting of a decarbonisation target in the Bill in order to give that clarity of purpose and to create a responsibility on the Government to deliver through the powers that they are taking. Unfortunately, we were unsuccessful in bringing forward the setting of a date for the setting of such a target. However, on Report the Minister was kind enough to give a partial concession in relation to the Government’s commitment to monitoring carbon intensity and to acting if carbon intensity remained high. The concession was that, should carbon intensity rise year on year for three consecutive years, the Government would report to Parliament, setting out why this was the case and the additional actions that would be taken to counteract that increase.

The concession is welcome. It is not a replacement for a carbon intensity target by any means, partly because carbon intensity is currently at an astonishingly high level. This is because the merit order currently favours inefficient old coal plant over more efficient, cleaner gas stations. Therefore, currently carbon intensity is higher than would otherwise be the case. Intensity seems unlikely to increase. If it did, something would be seriously awry with government policy. The concession, while welcome, does not go far enough but I should hate to lose it. The purpose of this amendment is to place that commitment in the Bill to introduce into it a measurement of progress and a mechanism through which the Government will report back to the House on that progress and take corrective action.

It is fair to say that the interventions in this Bill and the powers that are given to the Secretary of State are so extensive that they ought to be matched with responsibility and a system of holding the Government to account to see that they are delivering. The measure of progress should be carbon intensity, the issue the Bill seeks to address. Therefore, I hope the Minister will accept this amendment in the spirit of enhancing that important part of the Bill that justifies why it has been introduced and the powers that have been taken. I beg to move.

Photo of Lord Teverson Lord Teverson Liberal Democrat

My Lords, this is a worthy amendment. However, Parliament is grown-up enough for those of us who are interested in these issues and see them as really important to notice what happens and seek answers from the Secretary of State and the Government about carbon intensity. The issue is important but the amendment adds little to the Bill.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I thank the noble Baroness, Lady Worthington, for tabling the amendment. The Government fully support the aim of clear and transparent reporting. However, like my noble friend Lord Teverson, I do not think it necessary to introduce an additional statutory reporting requirement to the Bill as the noble Baroness proposes. I shall set out quickly the reasons.

First, as the noble Baroness recognises, at Report I made a commitment to Parliament that the Government would undertake reporting measures once any decarbonisation target range had been set. This would supplement those reporting measures that are already included within Part 1 of the Bill. I repeat what I said on Report, which was that,

“where carbon intensity is reported to have increased year on year for three consecutive years, the Government will explain the reasons why, and, where appropriate, report additional actions to address it within the annual statement of grid carbon intensity”.—[Hansard, 28/10/13; col. 1366.]

Secondly, it is important to recognise that, under the Climate Change Act 2008, there are already high levels of scrutiny of the progress made to meet our economy-wide carbon targets. This includes coverage of the power sector within the context of our wider economy. For example: the Government currently report annually on emissions in the power sector through the UK’s greenhouse gas emissions inventory; the Committee on Climate Change publishes an independent and impartial report each year on our progress towards meeting our carbon budgets and the 2050 target; the Government provide annual responses to the committee’s recommendations, which include a dedicated chapter on the power sector; and the Government publish updated energy and emissions projections each year, setting out the future trajectory we anticipate the economy taking.

Lastly, the amendment proposes that these reporting measures start from the date of Royal Assent. The Government’s view is that it is logical for any additional reporting measures to be triggered by the setting of a decarbonisation target range rather than by the enactment of the Bill. That would ensure alignment with the existing reporting framework that is already included in Clause 3, and we should not forget that we already report on grid carbon intensity ahead of any decarbonisation target range being set. Section 5 of the Energy Act 2010 requires a three-yearly report to Parliament on progress in decarbonising electricity generation. That report sets out the policy framework and explains trends in grid carbon intensity over the reporting period.

In conclusion, the Government are already proposing a clear and robust target framework that includes regular reporting on progress in meeting any target range. That is in addition to the high levels of scrutiny that are already in place to meet our economy-wide carbon targets. For those reasons, it would be unnecessary to introduce another statutory reporting requirement. I hope that the noble Baroness will agree with me that the existing commitments are sufficient and will, on that basis, withdraw her amendment.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

I am grateful to the Minister for her response and for the contribution from the noble Lord, Lord Teverson. I agree that we are all mature in looking at these things and that people who scrutinise and follow this in detail will raise issues as they occur. However, something is clearly not working, otherwise why is it that carbon intensity has been allowed to rise to such high levels recently with the Government apparently incapable of acting to bring it down? Obviously, many factors play into that, but the whole purpose of the Bill is to bring some of those factors under greater control and to allow the Government to intervene in the market to create contracts for difference that bring forward investment in the low-carbon economy that would not otherwise be supported by the market.

There is a problem, given that carbon intensity remains stubbornly high; the measure of the success of the Bill will be that starting to fall. It is regrettable that the Government are not prepared to start monitoring that or reporting on it, in terms of actively managing it, until 2016, which is a number of years away. I understand that the Bill has existing requirements on reporting carbon intensity, and that it is routinely reported now, so I am happy to withdraw, but this is something we need to keep a close eye on. I am sure that the noble Lord, Lord Teverson, and others will join me in ensuring that we do just that.

Amendment 1 withdrawn.

Clause 34: Power to make capacity market rules

Amendment 2

Moved by Lord Jenkin of Roding

2: Clause 34, page 22, line 10, after “is” insert “, or who has notified the Secretary of State of his intention to become,”

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, Part 2, which is really the heart of the Energy Bill, contains all the proposals for the reform of the electricity market. Chapter 3 of Part 2, in respect of which I am moving this amendment, deals with a very important part of the reform, the introduction of the capacity market. As the noble Baroness has just mentioned, that is of course designed to try to attract investment which the market might otherwise find it difficult to support. It is one of the measures that the Government are introducing, if I may put it crudely, to keep the lights on—to make sure we have enough generating capacity to keep the power flowing. At this stage of the Bill, I do not think it is necessary for me to start spelling out all the details of this, which have been very substantially debated at Second Reading, in Committee and on Report.

However, I think it right once again to draw the attention of the House to the fact that most of the detail of this is to be in regulations. We are hoping that the Bill will be Law before the end of the year—indeed, I hope well before the end of the year—and that the regulations will follow next year, and we are waiting for those. I have to say to my noble friend that the Government have been extremely good at producing drafts of what all the really important regulations would contain. It is a substantial document and I do not propose to read it out, but there is an enormous amount of detail in it and it is helpful for those who have to operate the new system to have that detail now.

In addition to the regulations, there will also have to be what are called capacity market rules. They will either be made by Ministers, or can be made by the regulator, Ofgem. Again, in that document we have been given draft rules and I will come to them in a moment. Both the rules and the regulations are currently the subject of consultations and, while this is clearly essential to get them right and to make sure that they avoid unintended consequences, it means that even at this late stage of the Bill, it is not really open to us to debate the details. What we can ensure is that the Bill provides the necessary rules and guidance to what we think the Government ought to be aiming at in making these regulations, and that the processes by which they are made are sound and fit for purpose.

That is really what this amendment is about. It is Clause 34 that confers on the Secretary of State the power to make the capacity market rules. As I said, it is Clause 34(3) which gives the power to the “Authority”. That is the phrase used in the Bill, but that means giving the regulator, Ofgem, the power to make capacity market rules subject to conditions. These conditions may be about consultations, and in particular, they must provide that if it is Ofgem which is to make the capacity market rules, it must consult and then set out two categories of what one might call the participants in the scheme—either anyone who has a licence to supply electricity or anyone who is already a capacity provider.

It is my view that this leaves out an important group. Ministers have recognised that in order to promote competition—there will be a great deal more about competition on the next amendment that I will move—it is important that new entrants and independent generators should be enabled, or indeed encouraged, to apply for a contract under the capacity market arrangements. They may very well not already be licence holders, and by definition they are almost certainly not yet capacity providers. My amendment provides that, in addition to those two categories in the Bill, there should also be included anyone,

“who has notified the Secretary of State of his intention to become”, a capacity provider.

How important is this? I have already demonstrated that in this volume the draft rules cover no fewer than 119 pages. They are immensely complicated; the definitions alone cover 20 pages, which gives a measure of the complexity of all this. They cover such vital issues as the timetable for the capacity auctions, how those wishing to bid could gain the necessary prequalification, how to decide who is eligible to bid, how the auctions will be conducted and so on. This is all highly relevant to anyone who is going to take part in these auctions, especially new entrants and independent generators that are aiming to participate in the market. Surely it is as important for these companies to know about the rules and any proposed changes to them as it is for firms already operating in the industry. It is a very simple question and I think that the answer can only be: yes, they must know about them. I hope my noble friend will give us satisfaction. I beg to move.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change) 4:15 pm, 19th November 2013

My Lords, we support the amendment moved by the noble Lord, Lord Jenkin. Possibly it is merely an oversight that those who wish to become capacity providers are currently excluded from the list of consultees. As the noble Lord has explained, this part of the Bill is very important and should be open to new and independent players to attract them into the market. If all the capacity mechanism does is provide security to the existing incumbents, it will have failed in its aim to deliver capacity at least cost, with a good degree of competition enabling prices to be kept to the minimum. Given the context, it is an eminently sensible amendment and I really hope that the Minister will be able to support it.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I thank my noble friend Lord Jenkin for his amendment. Both the electricity capacity regulations and the capacity market rules form the legal framework that will enable the introduction of the capacity market. The capacity market rules will be subsidiary to the regulations, for which the Secretary of State will continue to have responsibility.

Much of the content of the capacity market rules will comprise provisions of a technical and administrative nature, designed to supplement the regulations and ensure the efficient running of the capacity market; for example, the rules will set out how the delivery body is to conduct capacity auctions and the pre-qualification process, as well as its duties to maintain a capacity market register and carry out monitoring and testing.

Given the technical and administrative nature of the rules, we therefore expect changes usually to be of a minor and technical nature, with the primary purpose of ensuring the efficient operation of the capacity market. It is important to make the duty to consult on those changes proportionate, and to get the balance right between consulting widely and implementing the change within an appropriate timeframe.

Potential capacity providers may not necessarily be affected by a proposed rule change in the same way as existing capacity providers; for example, existing providers will have rights or obligations under the capacity market that might be affected by a change in the rules. I am therefore of the view that potential capacity providers should not be added as parties that the authority must consult on every proposed change.

Nevertheless, it is important that if the authority were to propose a significant change to the rules that affected a wider range of parties, consultation on that change should go beyond existing suppliers and capacity providers. I therefore reassure my noble friend that we expect the authority to consult more widely, as appropriate, for any significant changes to the rules that might affect a wider range of parties, such as prospective capacity providers. This is reflected in the draft electricity capacity regulations 2014, published for consultation in October, which would oblige the authority also to consult the Secretary of State, the delivery body and,

“such other persons as the Authority considers it appropriate to consult”.

The authority will be producing guidelines on the process it intends to follow for making changes to the capacity market rules, including its processes for consultation and for considering rule changes proposed by a third party. The authority intends to publish these draft guidelines next spring before finalising them, allowing all potential capacity providers the opportunity to comment on them.

I hope that my noble friend has been reassured that the consultation provision in the Bill is not exhaustive and that the authority can, and will, consult more widely where appropriate. I hope, therefore, that he will withdraw his amendment.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, I am extremely grateful for the support from the noble Baroness, Lady Worthington, and it is very nice to know that if I had decided to divide on this I would have had her party with us. However, my noble friend has indeed been reassuring. I entirely accept that all these people should not be consulted on every minor change, but she has given us a clear assurance that, on anything of any significance, both the department and the regulator will consult all those who might reasonably expect to be affected. On that basis, I am happy to withdraw the amendment.

Amendment 2 withdrawn.

Amendment 3

Moved by Baroness Verma

3: Clause 34, page 22, line 15, leave out paragraph (b)

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, government Amendment 3 responds to a recommendation from the Delegated Powers and Regulatory Reform Committee regarding delegated powers in the capacity market. I am grateful to the committee for its recommendation and to my noble friend Lord Roper for raising it on Report. Amendment 3 will limit the powers of the authority to make capacity market rules and to confer additional functions on itself when exercising powers under Clause 34(3). It will do this by requiring the authority to obtain the Secretary of State’s consent on each occasion that it seeks to confer a function on itself when making capacity market rules. This will ensure that there is a sufficient level of oversight when the authority makes changes to the capacity market rules. I hope that my noble friend finds the explanation of my amendment helpful and I beg to move.

Photo of Lord Roper Lord Roper Deputy Speaker (Lords)

My Lords, I thank the Minister for having put forward this amendment which, as she says, follows the discussion that we had on Report and the report of your Lordships’ Delegated Powers and Regulatory Reform Committee. It is a most satisfactory amendment and, again, I thank the Minister for it.

Photo of Lord Grantchester Lord Grantchester Opposition Whip (Lords)

My Lords, after much debate in Committee and on Report we also welcome this further government amendment in response to the 11th report of your Lordships’ Delegated Powers and Regulatory Reform Committee, which was published at the end of October. It is indeed important that no blanket powers or consents should be given for making particular categories of rules.

Amendment 3 agreed.

Clause 57: Duty not to exceed annual carbon dioxide emissions limit

Amendment 4

Moved by Baroness Worthington

4: Clause 57, page 56, line 13, after “station” insert “with units emitting through a common stack”

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

My Lords, this amendment follows on from our discussion about the decarbonisation aspects of the Bill. Noble Lords will be aware that an important amendment was successfully added to the Bill at Report. It would close a current drafting loophole in the Bill that would allow old, inefficient, polluting coal stations to upgrade and seek extensive life extensions without the need to comply with any kind of emissions performance standard. This will now, of course, be debated in the Commons, and we look forward to seeing the results of that.

However, in succeeding in having this part of the Bill accepted, an interesting definitional issue has arisen. Bear with me as I try to explain it. The industrial emissions directive, which requires tightened quality standards to apply to coal stations from 2016, applies at a station level. A station is defined as “a common stack”, meaning a chimney that can be used by multiple units. This has interesting implications because the EPS limits can therefore be met by one unit upgrading to fit filters while another unit remains unabated but still operating unencumbered and at full capacity. Our intention in closing a loophole that could potentially extend coal’s life span to late into the next decade was that the EPS should apply at the same level at which the IED applies, meaning that if a station with four units decided to retrofit two of the four in order to comply with the IED, the station as a whole would then be caught by the EPS.

We have had representations from industry asking for clarification on this because, in sitting down to work out the implications of the amendment, they have looked at the Bill and seen that the definitions are not clear. The Bill defines a “plant” as a “station”, which is insufficiently precise when one is trying to assess this, because plants are made up of units. The definitions used in air quality standards use “common stack” for that purpose. The amendment would bring greater clarity to the EPS part of the Bill and bring it in line with the definitions in the industrial emissions directive. The implications of the Bill could then be understood by those making investment decisions on whether to upgrade their plant or to opt out, run their hours out and close.

I hope that I have made that clear—I fear that I may not have done because it is very complicated. To put it in its simplest terms, the Bill is insufficiently clear on these definitions of what constitutes a station and we have tabled this amendment to address that. I hope that the Minister will be able to accept it. I beg to move.

Photo of Lord Oxburgh Lord Oxburgh Crossbench 4:30 pm, 19th November 2013

My Lords, I support the amendment. The noble Baroness, Lady Worthington, is too modest. She has made it abundantly clear that clarity is needed in the legislation because, as the wording stands, simply part of an operating unit may be upgraded. I therefore hope that the Government can accept the amendment.

Photo of Lord Teverson Lord Teverson Liberal Democrat

My Lords, I welcome the amendment because clarification is needed—and, indeed, I thought that the explanation given by the noble Baroness was very good. I would be very interested to hear the Government’s view on how this issue should be resolved, as it is clearly important for the way in which the industry moves forward.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I am grateful to the noble Baroness, Lady Worthington, and I hope that I can add a little clarity on the matter she has raised. Under the existing provisions, and save for the circumstances provided for under Schedule 4, the EPS will apply to the entire generating capacity of any new fossil fuel power station consented after the EPS comes into force. For example, where planning consent is given for a new fossil fuel power station, the generating units that comprise the consented power station are, for the purposes of the EPS, the “generating station”.

A generating station will report its carbon emissions under the EU Emissions Trading Scheme and the intention is that those reports will be used to reconcile total carbon emissions in a year against the EPS limit for the generating station, which is calculated using the formula in the Bill—I hope that noble Lords are following me thus far.

In respect of the circumstances provided for under Schedule 4, paragraph 1(1) of Schedule 4 gives the Secretary of State a power to make regulations to apply the EPS to a generating station consented before the EPS came into effect where it replaces or installs an additional main boiler—so where it effectively adds to or renews its generating capacity.

Paragraph 1(1)(b)(iii) of Schedule 4, on which the Government were defeated on Report, would extend the scope of Schedule 4 to enable the Secretary of State to apply the EPS also to an existing generating station that fitted substantial pollution abatement equipment. The exercise of the power to make regulations under Schedule 4 is at the discretion of the Secretary of State, and it would be premature to comment on whether or how that power may be used.

Sub-paragraphs (1) and (2) of paragraph 1 of Schedule 4 together allow the EPS to be applied with or without modifications and to different parts of a generating station. For example, it could be applied to only those units that are new or have replacement boilers or to only those units that have fitted substantial pollution abatement equipment.

While I recognise that the proposed amendment may be one way of determining how the EPS will apply to fossil fuel plant, it does not cater for a wider range of circumstances in the way intended by Schedule 4. The regulation-making power in Schedule 4 provides for alternative approaches and, due to the potential complexities and impacts on existing assets were we minded in the future to exercise these powers, we would want to consult fully on possible options before making regulations. I believe that this would provide a more properly informed debate and I therefore ask the noble Baroness to take my reassurances at this stage and withdraw her amendment.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

My Lords, I am grateful to the noble Baroness for her reply. Discretion gives flexibility but equally it gives a lack of certainty for industry. I am not quite sure why this proposal is premature as we need to give clarity to those affected by this Bill as soon as possible. It seems to me that in maintaining this discretion, we are prolonging lack of certainty for the industry. I think that it is very important that we do this consultation quickly and that we give clarity as soon as possible, whether that is through the regulations that follow or in a separate process. I am sure that there are many people sitting in boardrooms around the country looking at their assets, who need to know this information and need to know how the department is interpreting its powers.

If the department is minded to have an EPS apply only to the units which fit the filters that make the upgrade, that will have the very perverse affect of allowing unabated plant—the other corresponding units—to operate indefinitely at very high load factors. That is precisely what we are trying to avoid with this amendment. There is a very strong reason why we do not believe that discretion is necessary and why the definition should be at a plant level. However, I understand that the Government may wish to consult and to seek a little extra time before making this issue fully clear. I hope that that is completed in the shortest time possible, as prolonging uncertainty will make life harder for the industry and investors in deciding what their next move should be following the passage of the Bill. I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

Clause 131: Designation of statement

Amendment 5

Moved by Lord Judd

5: Clause 131, page 101, line 5, at end insert—

“( ) how the Authority shall incorporate social and environmental factors in carrying out its functions.”

Photo of Lord Judd Lord Judd Labour

My Lords, in moving this amendment I remind the House that I am involved in a voluntary capacity in a number of NGOs concerned with the environment.

On Report, the Minister said that energy production and consumption should be sustainable. I remind the House of an important point made by my noble friend Lady Worthington, that we face a “quadlemma” in which we must tackle climate change, keep bills affordable and keep the lights on without sacrificing social and environmental standards in the process. It is very much in the spirit of this observation that I am pursuing this amendment.

On Report, the Minister helpfully reminded us that Ofgem has social and environmental duties and can consider sustainability when carrying out impact assessments for particular schemes. She also informed us that in future Ofgem’s forward planning must show how it will implement the new strategy and policy statement and that it must report annually on how it is contributing to the delivery of the Government’s policy outcomes. The Minister further explained that the Bill seeks to remove social and environmental guidance provision because it has,

“not achieved coherence between the Government’s energy strategy and the regulatory regime”.—[ Official Report , 6/11/13; col. 263.]

She explained that it would be replaced by a strategy and policy statement setting out the Government’s strategic priorities. She emphasised that Ofgem must have regard to strategic priorities and carry out its functions in the way that it considers best calculated to deliver the policy outcomes, and argued that this would be a stronger obligation on Ofgem than existed in current guidance.

The Minister undertook to write a letter to me and place a copy in the Library of the House setting out precisely how the Government will satisfy themselves that Ofgem will pay due regard to the effect on the environment of activity connected with the conveyance of gas through pipes or the generation, transmission and distribution of supply of electricity, including what measures, benchmarks and associated matters will be taken into account and used in establishing those benchmarks. The Minister has indeed written to me and the letter is in the Library, and I am grateful for the detailed advice about Ofgem’s various duties and responsibilities. However, I am afraid that her letter failed to establish how social and environmental safeguards would be implemented, not weakened, by the Bill.

We seem to be in a circular argument. As I explained in some detail on Report, the strategic priorities set out in the Ofgem policy statement are functions to which the principal objective and general duty is applied. This duty is to be found in Section 4AA of the Gas Act 1986, with equivalent provisions in the Electricity Act 1989. These provisions make it clear that the principal objective is to protect the interests of existing and future customers of electricity and, wherever appropriate, to promote competition. They are not about social and environmental considerations.

Furthermore, the Bill has been set out in such a way that, should the Secretary of State decide to issue social and environmental guidance in future, it would be subordinate to Ofgem’s commercial responsibilities. I have taken into account counsel’s advice that the reality will be that if the Bill is enacted as the Government propose, the explicit responsibility to issue social and environmental guidance will disappear. There is nothing in the Minister’s letter that indicates how it will be replaced. To be crystal clear about this, it is not a requirement that the strategy and policy statement should cover social and environmental issues, which it should if the present level of protection is not to be significantly weakened. My own views remain unchanged: Ofgem’s social and environmental responsibilities will be weakened by this legislation. If that is not the Government’s intention, there should be a clear statement in the Bill that the Secretary of State will indeed provide social and environmental guidance to the regulator in the strategy and policy statement. This small amendment would achieve that.

Even at this stage, I ask the Government to think very carefully about this and ask themselves: where is the vision? What does the word “sustainability” really mean? What sort of environment do we want to be living in, in future? What of the incalculable psychological and emotional value of landscape and its contribution to national well-being? If the Government recognise the quadlemma to which my noble friend referred and wish to address it, what are they actually doing to avoid the gradual destruction of the natural environment in their pursuit of energy goals? If current policy is anything to go by—it all seems to be about streamlining development—the answer seems to be not a lot. In short, it seems to be the Government’s express intent to remove environmental safeguards in the quest for growth. I beg to move.

Photo of Viscount Ridley Viscount Ridley Conservative

My Lords, I support the noble Lord, Lord Judd, in his amendment. I declare my interests as listed in the register.

I have only one minor correction to make. It is very important to draw attention to the fourth leg of the quadlemma, but we should really be calling it a tetralemma if we are going to be consistent in Greek. It is important that the concerns that the noble Lord has raised, which are vital to communities all over the country, about the desecration of landscapes that is being visited on them should be taken seriously. I look forward very much to what I hope will be a reassuring reply from the Minister.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

One thing which seemed to be missing from the letter to which the noble Lord, Lord Judd, referred was the role of the Environment Agency. I have raised this before. There are two separate agencies. There is Ofgem, as the regulator, and then there is the Environment Agency, which has some very specific responsibilities in this direction. When my noble friend replies to the debate, I hope she will put this in context.

I totally understand the point that has been made by the noble Lord, Lord Judd. I will not use the Latin, but the trouble is that what you put into one list automatically excludes anything else. That is a canon of legal construction. My noble friend has made it very clear that when there was a list of people who would be looked after socially—the disabled and chronically sick, those of pensionable age, those on low incomes and those residing in rural areas—that should not be taken as implying that regard might not be had to the interests of other types of consumer. That statement was made by the Minister, obviously on advice, so that I think the social thing is all right, but I accept the point that my noble friend Lord Ridley has made. We need to make sure that the environment is properly protected, but I had always understood that that was primarily the responsibility of the Environment Agency and other similar organisations. I hope that my noble friend can put this into context.

Photo of Baroness Whitaker Baroness Whitaker Labour 4:45 pm, 19th November 2013

My Lords, I, too, would like to record briefly my support for my noble friend’s amendment. The Minister’s letter is helpful, although I received it in a very roundabout way, but I do not think it goes far enough. There is a lot at stake here. Our environment is precious and is also vulnerable. Unless these safeguards are explicit in the way that my noble friend has drafted I am sure that they will come second to other considerations.

Photo of Lord Teverson Lord Teverson Liberal Democrat

My Lords, one of the things that I certainly enjoy when I get up when I am at home is seeing a living countryside rather than the one bathed in aspic, as some of my colleagues sometimes talk about. It is great to see a countryside that is there alive helping to generate the power that we need for this country and for its economy to move forward. It is a great delight to me and to many of my colleagues.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

I support my noble friend’s amendment. Getting the regulator to incorporate social and environmental factors was a hard-fought battle. It would be a great shame if the passing of this Bill should see us going backwards on that front. I am grateful to the noble Viscount for the correction, although I prefer quadlemma, because we can then talk about the effect that Cuadrilla will have on the quadlemma. I look forward to the Minister’s response.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I thank the noble Lord, Lord Judd, for his amendment and for raising the matter of Ofgem’s social and environmental duties. I recognise the importance that the noble Lord and others attach to this. It is recognised in primary legislation, which sets out Ofgem’s duties, including those concerned with environmental sustainability and social issues. The noble Lord will be aware that Ofgem has other duties, including its principal objective to protect consumer interests, including their interest in a reduction of greenhouse gases and security of supply, as well as duties to promote efficiency and economy and the need to ensure that energy businesses are able to finance their activities.

The Government recognise that Ofgem’s role to a large extent is concerned with identifying what is an appropriate balance between all of those different objectives. This is a case of an independent economic regulator. The Government’s principles of economic regulation state that,

“regulatory decisions are taken by the body that has the legitimacy, expertise and capability to arbitrate between the required trade-offs”.

In the case of energy, that body is, of course, Ofgem.

We are introducing the strategy and policy statement as a result of the Ofgem review, which concluded that this was necessary to provide more coherence between the Government’s strategic energy priorities and the way Ofgem regulates the energy sector. It is crucial, however, that the statement should not undermine independent regulation. The review also concluded that Ofgem should remain responsible for the consideration of trade-offs between economic goals and broader goals, including social and environmental matters. That is why Ofgem will now have additional duties to take into account the contents of the statement when carrying out its own regulatory functions, which will stand alongside its existing duties. As before, Ofgem will be expected to continue to achieve the appropriate balances between its objectives.

The strategy and policy statement will set out the Government’s strategic policy and identify policy outcomes which are relevant to what Ofgem should achieve, but it will not specify how Ofgem should act to achieve these outcomes or specify outcomes in a way that would compromise Ofgem’s independence. It is not necessary to restate Ofgem’s objectives within the strategy and policy statement and it would not be appropriate to include text which could be seen as directing Ofgem on how it should interpret its duties.

I repeat my previous reassurances that we will take social and environmental matters into account when we draft the strategy and policy statement and that there will be opportunities for interested parties to comment on its contents when we consult next year. Both Houses will be able to consider the contents of the statement before it is designated.

My noble friend Lord Jenkin raised the role of the Environment Agency. Ofgem is a regulator of the energy sector and the strategy and policy statement is aimed at achieving coherence between government energy policy and regulatory actions. It is not aimed at doing the work of the Environment Agency which, as my noble friend rightly said, is a duty on that agency.

However, the noble Lord, Lord Judd, and others have raised important points about visual amenity and other environmental concerns. Existing planning and environmental habitat legislation are operating in tandem with national policy guidance on planning matters. This provides the framework to ensure that this is done, and done properly. Environmental impacts are considered at all stages of the planning process, from the development of proposals by applicants, including, for example, through preparation of environmental statements, to consideration by the Planning Inspectorate and final determination and assessment by the Secretary of State. Environmental considerations are also taken into account when government are taking policy-making processes. Key guidance on considering planning for nationally significant infrastructure projects is contained in the national policy statements.

There is a lot already out there for Governments to utilise so, given all those reassurances, I hope that the noble Lord, Lord Judd, feels better reassured and will therefore withdraw his amendment.

Photo of Lord Judd Lord Judd Labour

My Lords, as I have said before, I have no doubts whatever about the Minister’s good will. What I am concerned about is the muscle that will ensure the objectives for which I have been arguing. I listened carefully to the words of the Minister. I am of course an optimist by nature and I hope that what she said will lead to the right conclusions. I would, however, be misleading the House if I did not say that I have a profound sense of foreboding of another grim slide downwards in the character and quality of our countryside. This really is a profoundly serious issue. We shall see what happens but I hope I am allowed to say that I am absolutely confident that if this Government fail to reverse the trend, it will be reversed by the future Labour Government who, after all, will be the heirs to all that fine and imaginative legislation between 1945 and 1951 which enshrined the importance of the countryside in our national profile. I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Amendment 6

Moved by Lord Jenkin of Roding

6: Before Clause 139, insert the following new Clause—

Secretary of State able to amend Authority’s powers after review

(1) If a formal review of the regulation of competition in the energy industry discloses that the Authority lacks the powers necessary to implement any changes recommended in that review, the Secretary of State may make regulations to amend the Authority’s powers so as to enable it to give effect to those changes.

(2) Regulations are to be made by statutory instrument.

(3) An instrument containing regulations which make provision falling within this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, this amendment is also in the names of my noble friend Lord Roper and the noble Lords, Lord Berkeley and Lord Cameron of Dillington. I am very glad to see the noble Lord, Lord Cameron, back in his place; he sent me the first e-mail from Ethiopia that I have ever received, only a day or two ago. I cannot promise to be quite as brief with this amendment as I was with the previous one that I moved.

The House will remember that on 31 October my noble friend Lady Verma repeated a long Statement about the Government’s energy policy, made in the other place by my right honourable friend the Secretary of State for Energy and Climate Change, Ed Davey. Towards the end of that Statement, following an announcement made earlier in another place by the Prime Minister, Mr Davey gave further details of a proposal to set up,

“annual reviews of the state of competition in the energy markets”.

He referred to them as “competition assessments”, to be undertaken,

“by Ofgem, working closely with the Office of Fair Trading and the”, newly established,

Competition and Markets Authority, when it comes into being”.—[ Official Report , 31/10/13; col. 1771.]

As noble Lords will be aware, there is now serious public mistrust of the way in which the regulatory system has been working. The recent spate of announcements of, in some cases, swingeing price increases for energy have simply inflamed that mistrust, so there has been a cautious welcome to the announcement. I say “cautious” because I think most people remain to be convinced that these reviews will make any difference in practice. They see that, in place of the more than 20 generating companies which we had before 1997, there are now only six major firms which control 92% of the generating market. They also see what they rightly perceive as the failure of the regulator to get tough with the industry, even to the extent of failing to use its existing powers; there can be no doubt about that—I am glad to see my noble friend on the Front Bench nodding her assent.

Last week the Secretary of State delivered what he called “a tough message” when he spoke to the industry’s main trade association, Energy UK. It is a long speech but I will quote just one or two bits of it because it very much reinforces the case for this amendment. Near the beginning of his speech he says:

“Trust between those who supply energy and those who use it is breaking down. You’ve admitted as much to me. For it is so difficult for people to work out what exactly they are paying for, that they fear the big energy companies are taking them for a ride when bills go up. Fair or not, they look at the big suppliers and they see a reflection of the greed that consumed the banks. So this is a ‘Fred the Shred’ moment for the industry to avoid the reputational fate of the banks”.

That was indeed a very tough message. He went on to make the claim:

“The Government and Ofgem have been acting to open up the market, to increase competition, and put consumers in control of where they get their energy, and how they use it”.

I suspect that few people are able to see that that claim has been actually happening.

This is not the time or place to quote more of what I believe was, by any standards, a forceful and effective speech, but I will allow myself one more quote. After making the point that tough and rigorous competition bears down on costs and prices, he referred to the annual competition reviews. He said:

“Competition works. We’ve seen small suppliers gain substantial business on the back of this year’s high price rises. And today’s announcement by”— he mentioned one of the companies—is, he said, another welcome thing. However, he said, this,

“will only work … when there is a relationship of trust between suppliers and consumers”.

He went on to talk about the reviews which had been announced.

Part of the problem has undoubtedly been that, for whatever reason, Ofgem has failed to use its powers. It is, no doubt, true that both the other bodies—the OFT and the new Competition and Markets Authority—will have further powers. However—and here we come to the amendment—what happens if the reviews throw up abuses with which the regulators do not have the powers to deal? Do we have to wait for primary legislation to provide those additional powers? That is why, in the exchanges that followed the Statement given in this House on 31 October, I asked my noble friend:

“Would it not be wise to take powers now in order to avoid having to introduce fresh primary legislation?”.

In her reply, my noble friend started by agreeing:

“The purpose of the review is to enable the regulators, led by Ofgem, to see what needs to happen in order to strengthen competition”.

She then ended:

“If they need extra powers, it is for the Government to ensure that we support them by ensuring that those extra powers are put in place”. —[Hansard, 31/10/13; col. 1775.]

That is quite right. However, she did not answer the question that I had asked, which was: what happens if the extra powers are needed and are not there? Should we not now give the Government power? They could put introduce regulations in the Bill that would give regulators extra power. That would be a considerably better solution than to wait for new legislation that might otherwise be necessary.

My noble friend and I had a brief discussion about this yesterday, and she asked me, “What sort of thing do you have in mind?”. Earlier today I drew her attention to the specific recommendations set out last July in a Which? report, entitled The Imbalance of Power. The report is quite long, but I will quote only two bits of it. It said that,

“we’ve found little to give consumers confidence that the prices they pay are fair. The structures of the biggest companies raise serious questions of conflicts of interests. Much price setting and trading is hidden away behind closed doors. The volume of trading and the level of competition in the open wholesale markets are low”.

Those are pretty swingeing criticisms. One then comes to the report’s recommendations, the first of which echoes an amendment that was moved at an earlier stage by the noble Lord, Lord Berkeley:

“Ring-fence supply businesses from generation businesses in vertically integrated companies by requiring a distinct license holder for each business. Which? considers that a natural skewing of incentives exists within the current vertical integration arrangements—reducing the effectiveness of the market to the detriment of consumers. Evidence set out in this report suggests that structures that put supply and generation or production businesses under a single management and governance structure, may impede competition, and so increase … prices”.

I do not know whether, if the review threw up a recommendation that something along those lines had to be done, it would be within the existing powers of Ofgem. But I do know that Ofgem does not seem ever to have considered any such thing in practice, so one wonders whether that is because it does not have the power to do it. The other bodies may have some power; I have not attempted to analyse that—but if there are no existing powers to enforce such a change, and if the reviews find that there ought to be such powers, why should we not give the Government the authority now to introduce regulations to create those powers? Why do we have to wait for other primary legislation?

If the Government were to accept the new clause it would do two things. First, it would demonstrate beyond peradventure to the industry that they are deadly serious about strengthening competition in the industry. Secondly, it might begin to rebuild the trust that the Secretary of State has acknowledged has evaporated. I beg to move.

Photo of Lord Berkeley Lord Berkeley Labour 5:00 pm, 19th November 2013

My Lords, I support this important amendment. The noble Lord, Lord Jenkin, has fully and clearly outlined the reasons behind it. Many of the concerns probably stem from misunderstandings, intentional or not, as to what Ministers, in particular, mean by the word “competition”. We hear that word a lot, usually in connection with the price consumers pay for their power, rather than the competition between the generators, or the unfair competition that results from the vertical integration between retail and the generators, which we discussed fully on Report.

The noble Lord, Lord Jenkin, is right to say that trust has broken down. There is a complete lack of transparency, and I do not think that the present structure is fit for purpose. Conflicts of interest seem to abound. I am still surprised that, apparently, Ofgem either does not have the powers or chooses not to use them. It should have done so long ago. Even if there is to be a competition assessment, why do we have to wait for it? Why has it not been done before? However, we are where we are, and as the noble Lord, Lord Jenkin, said, the amendment would be an important addition, as it would avoid several years’ delay if primary legislation were required before any action could be taken.

I would go one step further. If the Minister does not accept the amendment I shall suspect that the Government are completely in the pocket of the big six, and do not want it because it would cause trouble. They are more frightened of the lights going out—that is what the big six have said would happen—than they are willing to establish a structure for the industry that will take us forward into the future. I look forward to hearing what the Minister has to say in reply to the amendment.

Photo of The Earl of Caithness The Earl of Caithness Conservative

My Lords, I must speak against the amendment. My noble friend Lord Jenkin made some very good points about trust and getting more competition. That is absolutely true. However, competition narrowed considerably under the previous Labour Government. The noble Lord, Lord Berkeley, and the noble Baroness, Lady Worthington, have waxed lyrical during our discussions but we ought to recall that the previous Secretary of State for Energy under the Labour Government—Mr Edward Miliband—did absolutely nothing to correct the situation and refused to refer any of the energy companies to the Competition Commission.

My concern is that this amendment is the wrong way to solve the problem highlighted by my noble friend Lord Jenkin because it would take away parliamentary democracy. The amendment refers to,

“a formal review of the regulation of competition”.

That formal review could be held at any time. Let us imagine that we have a Government whom none of us in this Chamber likes. If the amendment is passed, they will turn to this new clause and announce that they will carry out a formal review. The formal review will have whatever outcome they want and they can implement its findings without primary legislation. That would take away a hugely important role not just of this House but of the other place.

Lots of little things could be done by secondary legislation. Having been a Minister, I am sure that officials and civil servants have already worked out as many areas as possible that can be dealt with by secondary legislation. However, very significant changes may arise which need to be properly debated in both Houses of Parliament, but which could escape that close scrutiny if this amendment is passed. If a future

Government of whatever persuasion were to use this new clause, I can imagine the row that would erupt in this House and the complaints that would ring around this Chamber that there had been a lack of opportunity for debate, particularly from the noble Lord, Lord Berkeley. We should not put ourselves in that position.

Photo of Lord Cameron of Dillington Lord Cameron of Dillington Crossbench

My Lords, hotfoot from Ethiopia, I rise to support this amendment. Unlike the noble Earl, Lord Caithness, I believe that this is a fallback amendment which cannot in any way harm either the general thrust or the detail of the Government’s policy, as spelled out in the Bill. As I said on Report, and the noble Lord, Lord Jenkin, has made amply clear this afternoon, the Secretary of State continually talks the talk about the importance of competition to all parts of the energy industry, yet the Government seem strangely reluctant to walk the walk when it comes to the Bill. I remain rather mystified by that.

I am sure that the noble Lord, Lord Jenkin, will respond to the comments of the noble Earl, Lord Caithness. However, the amendment refers to drafts of instruments being approved by each House of Parliament, so I do not see that the Secretary of State would be denied democratic freedom under the revolutionary scenario that the noble Earl made out. I hope that the unassuming, safety-net nature of the amendment will prove an exception to the Government’s reluctance to walk the walk in respect of competition.

Photo of Lord Roper Lord Roper Deputy Speaker (Lords)

My Lords, this proposed new clause follows up debates we had in Committee and on Report and is, I believe, a matter of considerable importance. I shall therefore listen with great care to what the Minister has to say in reply.

Photo of Baroness Worthington Baroness Worthington Opposition Whip (Lords), Shadow Spokesperson (Energy and Climate Change)

My Lords, here we are at Third Reading debating an issue of such fundamental importance that it merely serves to illustrate the point that, although this Bill is considerable in size and breadth, it fundamentally fails to do what it says it is going to do: that is, reform the market.

Although I am sympathetic to the defence of this amendment that has been put forward, it simply is not enough. It hinges on whether one believes that a review undertaken by Ofgem will deliver anything. On this side of the House, we are absolutely certain that it will not. We have had numerous reviews from Ofgem, and Ofgem has clearly demonstrated that it is not fit for purpose. That is why the Labour Party and the leader of the Opposition have been absolutely crystal clear that under a Labour Government we would have a complete restart of that regulatory body to refocus it on putting the consumer first and bringing genuine competition across the market, not just in supply, tariffs and the consumer-facing parts of the industry, but all the way through the chain. That includes the generation market and the wholesale market, but also, importantly, the regulated aspects of this industry.

Throughout the passage of the Bill one part of the energy sector has gone almost without mention. That is the regulated aspects of the industry: the distribution network operators and the transmission grid operators. I inform noble Lords that on Friday Ofgem will be issuing a consultation on the business plans of the DNOs. We raised this issue in Committee. They are now extended to eight-year regulated periods. Starting in 2015, they will sign off on a business plan that will last eight years to 2023—just think how many Governments that covers—and that essentially ties the hands of future Governments who want to look at that aspect of industry. It is an important issue because these regulated industries are going to change; they will see changes arising from the Bill. If the Bill does what it says it is going to do, which is to decarbonise and to help us move to a more sophisticated demand-management system through capacity mechanisms, it has significant implications for those regulated aspects of the industry and yet we have heard scarcely a word about that. We have a price review which is completely out of synch, and the business plans have been drawn up before the Bill has even received Royal Assent.

It is evident to me that the regulator is not fit for purpose. I have heard anecdotally that various parts of Ofgem, not the whole thing, have gone completely native and are now merely rubber-stamping what the industry wants. Therefore it is deeply regrettable that we are, at this very late stage, having such a fundamental discussion. It reflects very badly on the Government. This would not even be an issue if the leader of the Opposition had not made it such a political centrepiece of his conference speech, and here we are, several months later, discussing it and still we have no cohesive or comprehensive answer from the Government.

I support the principle behind the amendment, but I fear that it is simply too little, too late. We need a fundamental resetting of the market to rebuild the trust which, it is clear, has been lost. We must look at all aspects of the industry again to ensure that we put the consumer first and, as we strive to meet the many challenges involved in energy policy, that we put the consumer and value for money centre stage as we also seek to achieve the very important aims of keeping the lights on and addressing climate impacts. I am grateful to the noble Lord, Lord Jenkin, for raising this at this time, however it is, as I said, too little, too late. We really need a fundamental review of this, and that can happen only under a new Government.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 5:15 pm, 19th November 2013

My Lords, I am grateful to my noble friend Lord Jenkin for his amendment and for raising again the important issue of competition. I reassure my noble friend that we are deadly serious about greater competition. Competition is at the heart of the Government’s drive to make sure that energy bills are as low as they can possibly be, to ensure that all consumers are getting a fair deal and, as importantly, to build the trust that my noble friend referred to.

In response to the noble Lord, Lord Cameron, we are walking the walk. That is why we have seen a great number of new entrants since 2010. The Government announced in the annual energy statement that Ofgem and the competition authorities— the Office of Fair Trading and the newly created Competition and Markets Authority—will conduct an annual competition assessment of the energy market. The first assessment will be completed by spring 2014. Together, these independent regulators already have extensive powers to investigate the market and to implement the full range of structural and behavioural remedies to strengthen competition. The statutory framework includes important safeguards to give market participants confidence in a fair and predictable regime. The Government have established the Competition and Markets Authority, which will have strengthened responsibilities and powers and will take on the work of the Competition Commission and a number of responsibilities of the Office of Fair Trading. This will lead to more robust and faster decision-making.

We are strengthening Ofgem’s hand through the Bill. The Government are taking powers to enable Ofgem to step in to improve wholesale market liquidity should its reforms be frustrated or delayed, and we are giving statutory backing to Ofgem’s retail market reforms. We are also giving Ofgem a new power to compel energy businesses to provide redress to consumers. These measures will further strengthen Ofgem’s ability to take effective and timely action to strengthen competition.

I listened carefully to the noble Baroness, Lady Worthington, about the weakness of Ofgem and what her party would do, but Ofgem’s inception was under her Government, and they had 17 reviews. They had ample time to reform Ofgem, if they had wanted to. While I keep hearing from the noble Baroness that her party would abolish Ofgem, they have never given us a sound, credible alternative. When she says that the leader of the Opposition has put consumers at the heart of prices, I remind her that the Prime Minister highlighted the need to simplify the many thousands of tariffs that cropped up under the previous Government.

I should say to the noble Lord, Lord Berkeley, that we are not frightened of the big six. That is why Ministers in my department have been having tough, robust conversations with all energy providers to ensure that they understand quite clearly that this Government are determined to ensure the best outcomes for the consumer.

Finally, the strategy and policy statement will give Ofgem clear guidance on the policy outcomes that are to be achieved to implement the Government’s strategic energy priorities. The Government stand ready to act in support of the regulators where necessary, as I have already said to my noble friend. We had a constructive conversation yesterday in which I wanted to reassure him that those powers are already there. It is for us to ensure that they are being utilised properly. My noble friend mentioned the Which? report on ring-fencing. Ofgem, the Office of Fair Trading and the Competition and Markets Authority will consider all measures that may be necessary in the competition assessment. Together they have far-reaching powers and are able to put in place the full range of remedies, which may include some forms of ring-fencing. It is for the competition authorities to decide what needs to be done, based on evidence. I hope that my noble friend is reassured that the Government are indeed taking this matter very seriously. The regulators have extensive powers to act, which are being strengthened by the creation of the Competition and Markets Authority. I hope that on that basis he is content to withdraw his amendment.

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

My Lords, my noble friend has gone quite a long way to reassure me, but I have one or two other questions. However, before I come to them I shall respond to my noble friend Lord Caithness. This amendment simply creates a new power to make regulations that confer powers on the regulator; it does not attempt to say what should be in those regulations. Of course they would be subject to consent by both Houses of Parliament, and I have no doubt that if a significant new power were required, that, too, would have to be subject to an affirmative resolution, or possibly a super-affirmative resolution, in both Houses. I do not see this as being undemocratic and without parliamentary review. The parliamentary review would happen inevitably at each stage. I cannot accept my noble friend’s suggestion that this is the wrong answer.

I recognise and am grateful for the support that the amendment has received, even the somewhat doubtful support from the Opposition Front Bench. I can only echo my noble friend on the Front Bench. The Opposition have yet to explain of what this new marvellous—what should we call it?—“restart” of the whole system is to consist of. I believe in building on what we have got and improving it, rather than taking a leap in the dark and making some entirely new start. These reviews that have been announced—I caught wind of them some time before the Prime Minister made his statement in the other place—are a major new effort to get at why competition has not been working largely because of the reduction in the huge number of generators under the previous Government.

I am grateful to those who supported the amendment. I agree that the main purpose of stronger competition is to protect consumers. A recent National Audit Office report looked at the impact of infrastructure investment on consumer bills. Its view was that,

“Government has made no assessment of the overall impact of infrastructure on future bills or whether those bills will be affordable. Therefore government and regulators are taking decisions on behalf of consumers in the absence of full information about the situation for consumers”.

This is a worrying report. It points to a considerable shortcoming of not just this Government, but all Governments. It is interesting that its first two recommendations are aimed at the Treasury. The Treasury has to set up the structures whereby consumer interests can be considered during the whole question of the infrastructure investment. I do not think I am being unduly alarmist by pointing out that if there has been neglect of the consumer interest in the consideration of the Government’s infrastructure investments, it is not altogether unreasonable to assume that it has also been neglected elsewhere in government, and that this is a wider problem. I do not want to pursue that now except to say that I shall be looking forward to the Government’s response to the National Audit Office report.

My noble friend has gone a long way. She referred to the new powers in the Bill. She also referred to the extra powers that may be available to the Office of Fair Trading and the new Competition and Markets Authority. I shall take her at her word that these are the kind of things that could deal with the proposal that has been made by Which? about separating out the vertically integrated forms. She indicated that that could well be part of the process. On that basis, it would be wrong to divide the House. One point on which I do agree with the noble Baroness on the Opposition Front Bench is that this is a very late stage to raise an important issue. It arose out of the Statement that was made on 31 October. That was the first time that we got the details of these reviews. I hope I have not been wasting the time of the House in bringing this forward, but in this circumstance it would not be right to take the opinion of the House. I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Clause 139: Power to modify energy supply licences: domestic supply contracts

Amendment 7

Moved by Baroness Verma

7: Clause 139, page 108, line 31, at end insert—

“(f) provision for requiring a licence holder to provide information to domestic customers about the licence holder’s costs, or profit, attributable to its domestic supply contracts, which may, in particular, include information about—

(i) particular kinds of those costs, and

(ii) the extent to which domestic customers’ costs are attributable to any of those kinds of costs, or to profit;”

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 5:30 pm, 19th November 2013

My Lords, this group of amendments has the effect of giving the Secretary of State the power to require energy suppliers to provide a breakdown of costs to consumers. This includes both information about their costs in supplying domestic customers and costs passed on to domestic consumers through the Government’s environmental and social programmes. It also enables the Secretary of State to set out the categories of costs to be included and to determine the frequency with which this information must be provided. I am grateful to my noble friend Lord Forsyth, who sadly is not in his place today, and to other noble Lords who raised this matter on Report. I listened very carefully to the views expressed and the Government have brought forward this amendment in response.

The Government are in complete agreement on the importance of providing clear information on the costs that contribute to consumers’ energy bills, including the costs of government policies. Indeed, that is why the Government publish each year a detailed assessment of the impact of our policies in the Estimated Impacts of Energy and Climate Change Policies on Energy Prices and Bills. However, I recognise the strength of feeling on this issue and that is why we will now go one step further and ensure that this information is provided directly to consumers. We will be working with consumer groups, including Which? and Consumer Futures, to take this forward. Four of the largest suppliers already provide a breakdown of their costs on consumer bills. As a first step, I will be seeking a voluntary agreement with other suppliers to ensure that they also provide a breakdown of their costs to consumers.

It is right that we should first pursue a voluntary agreement, as this is the quickest and most cost-effective route to getting this information out to consumers. In the event that the Government are unable to reach agreement to a voluntary approach, the Secretary of State will exercise this power. We need to strike a balance between providing sufficient detail on the costs associated with supplying gas and electricity, and significantly increasing suppliers’ costs, which would inevitably end up being passed on to consumers.

I will explain the types of costs about which suppliers might be required to provide information. I expect to see costs broken down into the following types of categories: wholesale energy costs, network and distribution costs, costs of complying with government environmental programmes, VAT, operating costs and profit. How suppliers display these costs should be left for them to decide, provided they include these categories. I believe the approach we are taking strikes the right balance by providing transparency to consumers on the costs incurred by suppliers without imposing significant additional burdens. I beg to move.

Photo of The Bishop of Chester The Bishop of Chester Bishop

My Lords, I welcome this amendment, which began its life, I think, in an interchange between the noble Baroness and me in Grand Committee. She has pretty much supplied everything that I asked for then, and I am very pleased. The only point that I will make now is that the Government rightly want to make it easy for consumers to switch suppliers. That is a good thing and it is very helpful that this information will be made available one way or another on bills. However, it needs to be made available consistently, in the same form, by different suppliers, so that if you are comparing a bill from one supplier with a bill from another, the information is supplied in the same form on each bill. The noble Baroness did not quite make that point in what she said. I hope that she can assure us that these costs will be disclosed—either voluntarily or by the exercise of the power that she is taking—not only transparently but consistently and comparably by different suppliers.

Photo of Baroness Maddock Baroness Maddock Liberal Democrat

My Lords, I have one question for my noble friend. She talked about making environmental costs clear to customers on their bills. In the past few weeks, we have had lots of discussions about eco and green taxes, and it has become quite clear that the big six, in particular, have sometimes not pointed out to their customers, or admitted in their discussions, that some of those costs are social costs. Everything is in a bit of a state of flux at the moment but, depending on how things work out, it is also important that we are quite accurate on the bills about what is a social cost and what is a so-called green tax. I will also just say that I am very sorry that I was not here for the previous stage of the Bill when the noble Baroness accepted my amendment about the clarity of bills. I hope that the point that was raised by the right reverend Prelate will be covered in the amendment that was passed on Report concerning the clarity of Bills.

Photo of Lord Teverson Lord Teverson Liberal Democrat

My Lords, I very much welcome this government amendment. However, I have a concern which is similar to the concern expressed by my noble friend Lady Maddock about how these numbers are produced. When the price increases came through from the energy companies, a bill that I saw, to family members, bullet-pointed the green energy costs as being at the top of the list, giving the impression that this was the most important thing. We all know that numbers are subjective. Numbers in company accounts are as objective as they can be but they are subject to how things are interpreted to some degree; as we know, for example, in terms of the lack of tax that is paid by some multinational companies. Do the Government have any view about how these numbers should be somehow independently audited or at least be auditable, if we feel that they fall below standard?

Photo of Lord Jenkin of Roding Lord Jenkin of Roding Conservative

I will just add one point before my noble friend replies. I was very glad to hear her say that she would rather this was done voluntarily, but a back-up power is important to encourage the right response from the industry. I apologise to the right reverend Prelate. I was moving amendments on this subject during proceedings on the last energy Bill but one. Those amendments suggested that we needed to see more detail in the Bill. As other noble Lords have said, one needs to have a very clear view as to what these figures actually mean, which is not always apparent. I get bills with pie charts and other things from British Gas. I have one in front of me, to which I have referred before, from Southern Electric. Many of them try to do their best, but such is the lack of trust now between the public and the industry that the public need to be reassured that the figures actually mean what they say. I look forward to seeing what comes from this but, along with other noble Lords, I very much welcome these amendments.

Photo of Viscount Ridley Viscount Ridley Conservative

My Lords, as someone who spoke in favour of the amendment of the noble Lord, Lord Forsyth, on Report, I, too, welcome this amendment and think that it goes in exactly the right direction. I particularly welcome the emphasis on voluntary reporting, which will result in a much more flexible and effective way of finding out exactly what these costs are, and where they are, than if we tried to micromanage it by specifying the details ourselves as hopeless legislators rather than people who know how these things are done.

Photo of Lord Grantchester Lord Grantchester Opposition Whip (Lords)

From these Benches, I am happy to endorse the spirit of the amendments in the interests of consumers and providing them with more information on their bills. These amendments seem more neutral than those proposed on Report in that they do not seek in the Bill to mandate energy suppliers to highlight certain designated costs. The amendments thereby avoid the claim that they are targeting so-called green levies on behalf of one strident viewpoint. I listened carefully to the Minister’s words in proposing these amendments and, like the noble Baroness, Lady Maddock, I am not sure that I picked up entirely how the Minister expected costs to be broken down to include the social costs. Can she clarify that in her reply? The impact of different costs, especially the so-called green or environmental costs, should be balanced and it is important how that is portrayed to consumers.

We welcome the consultation that this will enable so that all views can be expressed prior to the introduction of regulations—if any are introduced. However, we are concerned that the transparency of the whole market needs to be enhanced, not simply transparency with respect to the costs of energy supply companies. I refer here to generating costs and transfer pricing within each of the big six power companies, which can make big margins on their generation that would not then show up as the Government may intend.

We remain concerned that these clauses do not go anywhere near far enough. From these Benches, we contend that without proper reform of the market, the data available at any later date are likely to be of severely limited use. At this stage, we are content with the amendments but regard them as highly immaterial to the overall transparency of the market.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change

My Lords, I am extremely grateful to all noble Lords for, by and large, their support for my amendments. I will quickly respond to the right reverend Prelate the Bishop of Chester and to my noble friend Lady Maddock about transparency. The Government and Ofgem both agree that it is important that suppliers are transparent about their costs, including the costs of complying with government environmental and social programmes. One part of the list to which I referred earlier was about complying with greater transparency on those costs. The suppliers would be expected to be able to comply on the cost of delivering government environmental and social programmes. Just to reassure noble Lords, the power enables the Secretary of State to specify the particular kinds of costs that suppliers must refer to, so if we need to get further detail, there is scope to enable that to happen.

I have tried to provide a balance between not overcomplicating the Bill and enabling consumers to be able to look at a bill, see how much their energy is costing them and see whether they are able to get a cheaper deal elsewhere. Providing that information in a way that is clear and easy to understand is what my amendment proposes to do.

Amendment 7 agreed

Amendments 8 to 10

Moved by Baroness Verma

8: Clause 139, page 108, line 47, at end insert—

“(4A) Provision that may be included in a licence by virtue of subsection (2)(d) or (f) may in particular—”

9: Clause 139, page 108, line 49, at end insert—

“( ) make provision about the times at which information is to be provided;”

10: Clause 139, page 109, line 46, after “make” insert “incidental, supplementary or”

Amendments 8 to 10 agreed.

.

Clause 145: Fuel poverty

Amendment 11

Moved by Lord Whitty

11: Clause 145, page 113, line 12, leave out “addressing the situation” and insert “reducing the number”

Photo of Lord Whitty Lord Whitty Labour

My Lords, in moving this amendment I shall also speak to Amendment 12. I had better declare an interest on this: I am the chair of a small fuel poverty strategy. I do so because the Minister was, I am glad to say, present at the opening of our conference today, which I am very grateful for.

We come now to fuel poverty. I am not quite sure how many “lemmas” we now have in energy policy, whether it is a tetralemma or a quadlemma, but clearly one of the objectives of energy policy must be to rectify the detrimental effects that arise from fuel poverty on some of the poorest in our land. The House will be well aware of how important it is to regard tackling fuel poverty as one of the priority aims of energy policy. There will still be millions of households in severe distress this winter because they cannot heat their homes properly. As a result, there will be millions of pounds of expenditure by the NHS in treatment of cold-related diseases, and sadly there will be some thousands of premature deaths.

Because of this background and because of the inexorable rise in consumer energy prices since about 2004-05—whatever programmes existed then were struggling against a rising trend of prices—the original intentions to eliminate fuel poverty, set down as far back as 2000, were no longer achievable. It was therefore of some concern to many of us that when the first version of this Bill appeared in another place, there was no mention whatever of fuel poverty.

In Committee, the Minister herself produced the provision that attempts to rectify that situation. It was commendable of her to persuade her colleagues that this was necessary, and the Government’s commitment in Clause 145 to producing a new strategy for fuel poverty in a maximum of six months’ time was broadly welcome—and I still welcome it. However, many of us also considered that more detail was required to make clear the nature of this strategy. As colleagues will remember, a number of more detailed proposals for inclusion in this part of the Bill were considered both in Committee and on Report. The Government rejected all of those, unfortunately, but at least the strategy is there.

The amendments before us today are much simpler in nature. They simply attempt to clarify what the strategy is about. I would have thought that the Government could simply accept Amendment 11. Clause 145 refers to the intention of the strategy as,

“addressing the situation of persons ... in fuel poverty”.

That is pretty neutral. Surely, at a minimum, the proposed strategy should be about either the elimination of fuel poverty or at least the reduction of the numbers of people in fuel poverty. That needs to be reflected in this clause.

I regret having to say this but the reason why it is so important that a reference to a reduction in numbers is included is that there is considerable scepticism out there about the Government's good intentions in this area. The Government started by closing down the only taxpayer scheme designed to improve the energy efficiencies of the dwellings of the fuel poor and, in effect, abandoned targets and sought to redefine the problem. Extreme cynics, some of whom I have met, would say that the main thing that the Government have so far done to “address” fuel poverty in the terms of this clause has been to change the definitions—to statistically manipulate 2 million people out of the figures without anything actually having changed.

There were problems with the old definition, and in my view there are even greater problems with the new one. But whatever the merits of the change in definition, the combination of that with the Government’s abolition of previous schemes, the slow and somewhat expensive start of the ECO—which is supposed to address the problem of fuel poverty—plus the lack of a mention in the original version of this Bill, has led to some scepticism about the Government’s intentions. I am moving this amendment so that the Government can make their aim clear. This relatively modest amendment is as much in the Government's interest as it is anybody else’s. I hope that they will simply accept it and make clear what the intentions of this strategy will be in a few months.

Amendment 12 is also intended to provide clarification. It has always been the case, and is still the case under this Government, that multiple measures are needed to address the problem of fuel poverty. The tariff structures, which were addressed at an earlier stage of the Bill, and income enhancements such as winter fuel payments for pensioners, are also important. Most important of all, however, is the need to improve the energy efficiency of the homes of the fuel poor. That is also important for carbon reduction purposes. However, the need to address energy efficiency in buildings is not mentioned in Clause 145 or anywhere else in the Bill.

When the Government express the strategy in terms of targets in a few months’ time, I hope it will be clear that the targets are about energy efficiency improvements as well as the number of fuel poor. If that is the intention then it would be useful to have a reference to energy efficiency in dwellings inserted in Clause 145 to clarify that intention. That is what the second amendment does.

It is in the Government’s interest to clarify this, and it will certainly be in the interest of the consultation which they intend to hold on the fuel poverty strategy in a few months’ time. I therefore hope that the Government will consider these amendments positively. I beg to move.

Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 5:45 pm, 19th November 2013

My Lords, I thank the noble Lord, Lord Whitty, for his amendment. Rightly, he has again highlighted the seriousness of fuel poverty, as he has throughout the debates on this Bill, and I know that on all sides of the House there is a real determination to ensure that the interests of the fuel poor are represented properly. Indeed, earlier today I attended an event with fuel poverty experts to gain a better understanding of how to tackle the problem, at the invitation of the noble Lord, Lord Whitty, for which I am extremely grateful.

The Government are determined to act to ensure that consumers get a good deal and affordable energy bills. Indeed, our analysis suggests that as a result of the electricity market reform measures in this Bill, household electricity bills will be, on average, around 9% lower per year over the period 2016 to 2030 relative to what they would be if decarbonisation were achieved through existing policy instruments. As such, the impact of EMR will be to reduce fuel poverty compared to what it would have been without these policies in place.

The noble Lord’s amendments would set an objective to reduce the number of persons living in fuel poverty and improve the energy efficiency of their dwellings. The Government are intent on tackling fuel poverty at its heart, with improving energy efficiency for fuel-poor households a real priority. We agree that improving the energy efficiency of fuel-poor homes can make a sustained improvement to the situation of households struggling to keep warm and it is therefore the right type of target to aim for. However, the right balance must be struck between what is set out in primary legislation and what is subsequently laid out in regulations, in order to maintain an appropriate use of parliamentary time and the level of government accountability.

Therefore, we have proposed setting out the detail of this objective through secondary legislation because we believe that this strikes the right balance between the certainty of a legislative target and the need for flexibility in the future. We know from Professor Hills’s independent review that the way in which we understand the problem can change over time, as well as the best ways of tackling it. Primary legislation is not the appropriate vehicle to set out the detail of the target, given the importance of a nuanced, flexible approach to tackling fuel poverty.

The issue with the current legislation is that there is a very specific target which does not make sense in the context of how we have come to understand the problem of fuel poverty. That is why we have framed the new provisions in the way that we have, to ensure that there is an objective to address fuel poverty but with the detail of that objective set out in secondary legislation. Our proposals ensure that the setting of the target, and any changes to it, will be subject to full parliamentary debate, and the importance of that debate is why we have suggested from the outset that these provisions will be subject to affirmative resolution by both Houses.

Furthermore, from a practical perspective, it would not be sensible to make specific reference to improving the energy efficiency of dwellings, as this could mean that every time the methodology for measuring energy efficiency is updated, the primary legislation would need amending. As this could occur every couple of years, it would not represent a proportionate use of parliamentary time for what would be very technical amendments.

To reflect on what the noble Lord, Lord Whitty, said about the measures we are currently using under ECO, thus far 311,250 energy-efficiency measures have been installed in around 273,000 properties through ECO and the Green Deal, to the end of September. The vast majority have been installed through ECO so we believe that ECO is working. It is reaching out to the very families that I know the noble Lord and I both believe need the greatest assistance.

In summary, I agree with the spirit of the noble Lord’s amendments but do not believe that it would be sensible to put this detail in the primary legislation

However, since we are agreed on the intention, I hope that my response has reassured the noble Lord and he will withdraw his amendment.

This is the last group to which I will speak, so before I sit down I would like to put on record my thanks to everyone who has played a role in the passage of the Energy Bill through this House. I start by thanking the Lord Speaker and all Deputy Speakers and Deputy Chairmen who have facilitated our proceedings. I also thank all those who have worked behind the scenes: the clerks, Hansard, the doorkeepers and the officials from the Ministry of Defence, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs who have supported the Government. I add my particular thanks to my officials from DECC, who have worked tirelessly—even to the point of giving up annual leave during the Summer Recess—to be able to provide the information that your Lordships required, which was made possible by the way they performed so heroically during the passage of this Bill.

I also thank all noble Lords who have taken part in our debates for their constructive contributions to the Bill. We have scrutinised it in full and I have no doubt it is leaving us in a better state than it arrived in, thanks to the expertise of this House. We have added new provisions on fuel poverty, access to markets and enabling the level of the small-scale feed-in tariffs threshold to be raised. Thanks to my noble friend Lord Roper and the Delegated Powers and Regulatory Reform Committee, we have also improved the level of scrutiny afforded to the delegated powers in the Bill.

I particularly thank my noble friend Lord Gardiner, who has so ably assisted me at the Dispatch Box, as well as my noble friends Lord Courtown and Lord Teverson, who have assisted from the government Benches.

I am also extremely grateful to all members of the House of Lords informal scrutiny group on the Energy Bill, which first convened for pre-legislative scrutiny and has continued its most helpful and appropriately challenging scrutiny in parallel to the Bill’s passage. I particularly thank the noble Lord, Lord Oxburgh, who I do not see in his place, for his long-standing chairmanship of this group.

We have not agreed on everything but I am grateful for the broad support there has been for the intentions of this Bill. As I am sure noble Lords will agree, it is now important that the Bill proceeds to Royal Assent as swiftly as possible in order to secure the investment that is vital for growth, jobs and the decarbonisation of our economy.

Photo of Lord Whitty Lord Whitty Labour

My Lords, I echo the noble Baroness’s sentiments in relation to the passage of this Bill. Although, apart from the Minister herself, we are now discouraged from making lengthy speeches at Third Reading, I would like to underline her thanks to her staff, because they have been extraordinarily helpful to other Members of this House. The meetings we have had under the auspices of the noble Lord, Lord Oxburgh, and the noble Baroness have been extremely helpful.

As the noble Baroness says, we have not always agreed. We do not entirely agree on this clause. Some of what she addressed in her reply related to earlier discussions we had on Report. I am not trying to specify targets in any detail; I am saying simply that the fuel poverty strategy should be about reducing the number of fuel poor, including by improving the energy efficiency of their homes. I would have thought that was pretty incontestable and really should have been reflected in this Bill.

I will not pursue this tonight but I will just say to the noble Baroness that because of when this was introduced, the other place has not actually considered the fuel poverty dimensions of this Bill. I rather suspect that her colleagues in the House of Commons will have some lengthy discussions on this and, in the light of that prospect, I will withdraw my amendment tonight. I reiterate my thanks to the Minister and her staff for the conduct of the whole passage of this Bill.

Amendment 11 withdrawn.

Amendment 12 not moved.

Amendment 13

Moved by Baroness Stowell of Beeston

13: After Clause 149, insert the following new Clause—

“Smoke and carbon monoxide alarms

(1) The Secretary of State may by regulations make provision imposing duties on a relevant landlord of residential premises in England for the purposes of ensuring that, during any period when the premises are occupied under a tenancy—

(a) the premises are equipped with a required alarm (or required alarms), and

(b) checks are made by or on behalf of the landlord in accordance with the regulations to ensure that any such alarm remains in proper working order.

(2) “Required alarm” means—

(a) a smoke alarm, or

(b) a carbon monoxide alarm, that meets the appropriate standard.

(3) Regulations may include provision about—

(a) the interpretation of terms used in subsections (1) and (2);

(b) the enforcement of any duty imposed by regulations.

(4) Provision made by virtue of subsection (3)(b) may in particular—

(a) confer functions on local housing authorities in England;

(b) require a landlord who contravenes any such duty to pay a financial penalty.

(5) Provision about penalties made by virtue of subsection (4)(b) includes provision—

(a) about the procedure to be followed in imposing penalties;

(b) about the amount of penalties;

(c) conferring rights of appeal against penalties;

(d) for the enforcement of penalties;

(e) about the application of sums paid by way of penalties (and such provision may permit or require the payment of sums into the Consolidated Fund).

(6) Regulations may—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings;

(c) make different provision for different cases or circumstances or for different purposes;

(d) make provision subject to exceptions.

(7) Consequential provision made by virtue of subsection (6)(a) may amend, repeal or revoke any provision made by or under an Act.

(8) Regulations are to be made by statutory instrument.

(9) An instrument containing regulations may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.

(10) Subject to provision contained in regulations, in this section—

“the appropriate standard”, in relation to a smoke alarm or a carbon monoxide alarm, means the standard (if any) that is specified in, or determined under, regulations;

“local housing authority” has the meaning given in section 261(2) of the Housing Act 2004;

“premises” includes land, buildings, moveable structures, vehicles and vessels;

“regulations” means regulations under this section;

“relevant landlord” means a landlord in respect of a tenancy of residential premises in England who is of a description specified in regulations;

“residential premises” means premises all or part of which comprise a dwelling;

“tenancy” includes any lease, licence, sub-lease or sub-tenancy (and “landlord” is to be read accordingly).”

Photo of Baroness Stowell of Beeston Baroness Stowell of Beeston The Parliamentary Under-Secretary of State for Communities and Local Government

My Lords, in moving Amendment 13 I will speak also to Amendments 14 and 15. Before I get to that, though, I will start by paying tribute to the noble Baroness, Lady Finlay of Llandaff, and indeed your Lordships’ House, for raising and debating the important matter of carbon monoxide poisoning during the passage of this Bill.

As noble Lords will recall, in Committee the noble Baroness, Lady Finlay, explained the effects of carbon monoxide poisoning and highlighted, as indeed did other noble Lords, some of the recent tragic cases. The noble Baroness tabled an amendment that would have introduced regulations for carbon monoxide detectors in the Bill. We could not accept that amendment but it provoked a debate within government which led me to announce on Report a couple of weeks ago that we would extend our review of private rented accommodation to examine whether landlords should be required to install carbon monoxide detectors.

Noble Lords will recall that on Report the noble Baroness tabled an amendment that would have introduced order-making powers on the Secretary of State. During our debate then I was clear that the Government could not commit to regulate in advance of the completion of the review I had announced that day. However, as I could see the merits of having the power in place should the Government decide that regulations are the correct course of action, I agreed to discuss this further with my ministerial colleagues. Having done that, I am pleased to put forward government amendments today and am also pleased that the noble Baroness, Lady Finlay, and others have added their names.

The amendments before us now differ from the one tabled by the noble Baroness, Lady Finlay, on Report in two important respects. First, the government amendments also cover smoke alarms. We decided that it would be sensible to do so given that the arguments around carbon monoxide alarms are very similar for smoke alarms. Secondly, the amendments apply only to rented housing, whereas the amendment tabled by the noble Baroness, Lady Finlay, would have applied to all properties, including owner-occupied ones. We have restricted the scope of the amendment in this way because tenants in rented homes do not generally have the same degree of control over their homes compared with home owners and may therefore need greater protection. In addition, there is some evidence that privately rented homes represent a greater risk to the safety of occupiers than any other sector.

In tabling these amendments, I make it clear again that the Government remain to be convinced of the need to regulate in this area at this time. However, as I have said, we have decided that it would be prudent to take the necessary powers now. We will now take forward a wide-ranging and fundamental review into property conditions in the private rented sector. The review will consider very carefully the case for requiring landlords to install carbon monoxide alarms and/or smoke alarms in their properties. The review is scheduled to last approximately six months and to conclude in June 2014. As soon as possible following this, the Government will publish a report which will summarise the key findings of the review, set out government conclusions and detail the Government’s intended actions following those conclusions.

The first stage of the review will be the publication next month of a discussion document setting out the terms of reference and inviting views on a range of issues. We will also engage widely with interested organisations including landlord associations, housing charities, tenant groups and professional bodies. In addition to considering whether smoke and carbon monoxide alarms should be required in privately rented housing, the review will also look at the minimum standards tenants should expect when renting a property. This will include considering the requirements of the Landlord and Tenant Act 1985, the current licensing system for privately rented housing, current requirements around regular checks of electrical installations in the home and whether there is a need to introduce a compulsory system requiring that such installations are checked regularly. We will also give careful consideration to the possibility of requiring landlords to repay all or part of any rent they have received where they rent out a property that contains serious health hazards or has other major defects.

It is important that we do not prejudge the outcome of the review. The Government are seeking to take these powers now to enable us to move quickly if the review concludes that such alarms should be mandated in this sector. I hope, therefore, that noble Lords feel reassured by what I have said today and are reassured that the Government take this issue very seriously. I am very grateful to noble Lords for their intervention on this important issue which has had a significant impact in raising its profile. I beg to move.

Photo of Baroness Finlay of Llandaff Baroness Finlay of Llandaff Crossbench 6:00 pm, 19th November 2013

My Lords, I am delighted to add my name to this amendment. This is Carbon Monoxide Awareness Week so the amendment is extremely timely and I am glad the Government have been prudent, and prudent enough to extend it to smoke alarms as well. I am most grateful to the

Minister for the time that she has spent with me on this issue and also to the noble Baroness, Lady Verma, in her role as Minister taking this Bill forward. I hope that the Public Health England warning that went out yesterday over fossil fuel and wood-burning stoves for Carbon Monoxide Awareness Week will become a thing of the past. It is important that the cost of a working smoke alarm at European Standard EN 50291, guaranteed for seven years, is put in context. One year’s protection costs less than a large cup of coffee at a motorway service area. Some 40 people a year on average lose their lives through carbon monoxide poisoning and about 4,000 people end up in A&E. This is a really important step. I wish that we did not have to take it but I am sure that we will end up needing to have regulations made. I will continue to question the Government as it goes through and I will be watching the review very carefully. In the mean time, I am most grateful and I am sure that the victims’ families are also grateful that the Government have listened carefully and acted at a point where they could.

Photo of Baroness Maddock Baroness Maddock Liberal Democrat

My Lords, I, too, added my name to this amendment and I am very grateful to both Ministers for bringing this forward. Like most people who have campaigned on this issue over the years, it began with a personal experience. My first experience was in a private home where a room had been made in a roof and there were fumes as the builder had not properly sealed the chimney. I hope that at some point we can look also at homes other than rented ones.

My experience was 20 years ago and over those 20 years a number of groups and individuals have campaigned on this. During the passage of this Bill, we got the old familiar answer that, “It is not our department”. I am very grateful to the Minister because she did not stop it there and the noble Baroness, Lady Finlay, and I had a very productive meeting with her and her officials—she took on board that we really ought to sort this out. It must be somebody’s responsibility somewhere. I had hoped that there might be some regulations somewhere that we could add this on to but that is not exactly what has happened. I also raised it with my right honourable friend Ed Davey, the Secretary of State at DECC, and he took this seriously as well, so I know that a lot of work has gone on to bring this forward.

I, too, thank the Minister for the amazing access we have had and the information that we have all been party to through the passage of the Bill through this House. As other noble Lords have said, we always make legislation better when it comes here. We have certainly done that and I thank the Minister for bringing forward the fuel poverty strategy. We know that it is not perfect but we are really grateful as it was not there before. As the noble Baroness, Lady Finlay, said, on behalf of all those who have campaigned about the unnecessary deaths from this silent killer, carbon monoxide, we thank everybody who has brought forward these amendments today. However, like the noble Baroness, Lady Finlay, I shall be watching what happens in future because the dreaded word “may” is in the Bill; it is not “must”.

Photo of Lord Grantchester Lord Grantchester Opposition Whip (Lords) 6:15 pm, 19th November 2013

My Lords, we, too, thank the Minister for joining with the energy department to bring forward this sensible amendment which, if implemented, will undoubtedly save lives. We also thank the noble Baroness, Lady Finlay, and other noble Lords, including my noble friend Lord Harrison who cannot be in his place today, who have campaigned strongly on the issue. Deaths from carbon monoxide and from fire are avoidable. These alarms are cheap to buy and fix and must be among the most efficient life-saving devices ever on the market. It must also be stressed that there can be no substitute for regular maintenance. I am glad to see that element also included in the amendment.

While welcoming the consultation to capture views on how the measure may be taken forward as part of a wider review, our only concern is that the Government may not bring forward the necessary regulations despite the undoubted value of these devices, which could save hundreds of lives a year. Will the Minister tell the House when the review announced on 16 October will report? We see no reason to hold up this welcome measure unnecessarily while the review looks at a number of other, quite unrelated issues. We therefore urge the Government to move with some haste on this measure, so saving tenants across the country from the risk of death either from fire or from carbon monoxide poisoning.

Photo of Baroness Stowell of Beeston Baroness Stowell of Beeston The Parliamentary Under-Secretary of State for Communities and Local Government

I am grateful to all noble Lords who have spoken and for their support for these government amendments. I share the views expressed by my noble friend Lady Maddock and the noble Baroness, Lady Finlay, on the work that my noble friend Lady Verma has done in this area. It was she who responded to the debates in Committee and ensured that there was the greater collaboration across government departments that led to the announcement that I made on Report. We have worked together on this, but the amendment was triggered by her response to the debates that took place in Committee.

I do not think that there is a great deal more for me to add to the points that I made when moving the amendment. I am grateful to the noble Lord, Lord Grantchester, for his support for the amendment. As I said in my opening remarks, the review that the measure forms part of will conclude next June. We will be as swift as possible in making public our conclusions in response to that review. As I have said and as I have demonstrated today, if the outcome of that review is a decision that we should regulate, we now have in place the order-making powers that would make that possible. The noble Lord urged us to go further, but as I said when we discussed this matter at the previous stage, his own Government conducted a comprehensive review of this area only in 2009 and concluded that they should limit regulations to just the installation of solid-fuel appliances. I accept his challenge and the pressure he puts on me to make sure that we go further, but we are doing this by way of review because we think that it is the right thing to do. I am quite confident that, by conducting a comprehensive review, we will be able clearly to demonstrate that our conclusions are evidence-based and well informed.

Amendment 13 agreed.

Clause 154: Extent

Amendment 14

Moved by Baroness Stowell of Beeston

14: Clause 154, page 122, line 6, leave out “Section 145 extends” and insert “Sections 145 and (Smoke and carbon monoxide alarms) extend”

Amendment 14 agreed.

In the Title

Amendment 15

Moved by Baroness Stowell of Beeston

15:In the Title, line 12, after “State;” insert “about smoke and carbon monoxide alarms;”

Amendment 15 agreed.

Bill passed and returned to the Commons with amendments.