Clause 180 - Assistance for areas with high distribution costs

Part of Energy Bill [Lords] – in a Public Bill Committee at 10:45 am on 22 June 2004.

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Photo of Nigel Griffiths Nigel Griffiths Parliamentary Under-Secretary, Department of Trade and Industry 10:45, 22 June 2004

These are important matters, and the new scheme has a number of benefits that I want the Committee to consider carefully. The cost of the new scheme, unlike hydro benefit, will not fall on just one company; it will be borne by all electricity suppliers, and all suppliers will be treated in the same way. That is why the Government are confident that the new scheme is not contrary to EC law, which is another important point that was raised.

I shall deal with the sunset clauses in a moment. I will first address the points made by the hon. Member for Angus and my hon. Friend the Member for Western Isles, by setting out the case for a three-year review, rather than a review after five years or longer.

Recent evidence and experience shows that the electricity market is a changing market and that it will probably continue to change. That change will affect distribution price controls and the level of distribution costs relative to other areas, and it will reflect the impact of BETTA and Ofgem's plans to move transmission and distribution charges on to the same basis within three years. The clause gives the Secretary of State the power to take all those aspects into account when the scheme is reviewed in three years. I am advised that if we removed that power, we would remove an important mechanism by which we intend to ensure that the future level of subsidy is appropriate. No one is in any doubt of the value of the subsidy to date, and my hon. Friend the Member for Western Isles, who has taken a keen and expert interest in the matter over many years, is aware of its value as well as the complexity of the issues before us.

My hon. Friend rightly highlighted the issue of sunset clauses. The power set out in the Bill is designed to give a helping hand to renewables while the industry gets on its feet and gains commercial respectability and the confidence of investors. A 10-year period has been set in which to achieve that; the power is not intended to be an ongoing means of support for renewables. The

Government have already planned for substantial support for renewables through the renewables obligation, which hon. Members will be pleased has recently been extended to 2015.