Clause 16 - Licence modifications

Energy Bill – in a Public Bill Committee at 3:30 pm on 24 January 2013.

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Question proposed, That the clause stand part of the Bill.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

Subsection (3) of clause 16 states:

“Provision included in a licence, or in a document or agreement relating to licences, by virtue of the power under subsection (1) may in particular include provision of a kind that may be included in regulations.”

That is probably a lawyer’s dream. I have read it a number of times and, although I do not often wish to advertise my ignorance, I do not understand what it means. I am sure that there is a simple and clear explanation, but given that the Bill and the explanatory notes are not particularly helpful in that regard, will the Minister, in his Churchillian way—

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

Or in any other fashion, will the Minister explain what that means? The serious point is that the modification of a licence is an important act performed by the Secretary of State, and aside from a duty to consult there is no detail about how the Minister can be held to account for a modification or about  whether he is obliged to report it to Parliament. Will the Minister outline what the procedure will be when the Secretary of State makes a licence modification for the purposes outlined in the clause, and what the obligations on the Secretary of State are to report such modifications? Those seem like a couple of minor points, but it would certainly help me, and I am sure other members of the Committee, if we were able to understand the provision better.

Photo of John Hayes John Hayes The Minister of State, Department of Energy and Climate Change

I am inclined to become Churchillian: never in the field of scrutiny have so few worked so hard to such noble purpose.

The regulations in the subsection that the hon. Gentleman claims he cannot grasp—I do not blame him for a moment—are CFD regulations. I will consider whether we should add “CFD” to make that clearer. I will take that away and think about it. That is a good point from a drafting point of view. If I had read that without the support of the advice I am able to draw on, I am not sure I would have necessarily gleaned that in the way that the hon. Gentleman does.

Clause 44 sets out the details that the hon. Gentleman referred to in the second part of his comments. With that I am happy to move on.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test 3:45, 24 January 2013

I want to raise briefly, but on a wider basis, a number of points relating to the powers that the clause would give the Secretary of State with regard to licences. We could say the clause is the end of the beginning; it is certainly not the beginning of the end. The clause, at the end of the chapter relating to CFDs, would give the Secretary of State powers to modify

“a condition of a particular licence under section 6…of EA 1989” and to make modification under subsection (1) for particular purposes, as well as require the Secretary of State to consult various people when so doing.

My puzzlement with this clause relates to the fact that the Secretary of State may modify those licences. In all legislation concerned with electricity markets and management of the markets it is quite clear on who modifies licences: that is, the authority, Ofgem. The Electricity Act 1989, referred to in clause 16(1), was modified by the provisions in the Utilities Act 2000. I have come across a clever device for ensuring that documents that I wish to refer to do not disappear in the new arrangements for the decc.gov.uk website. I have a bit of paper here, which works quite well, I find.

The provisions in the Utilities Act 2000 make it clear that the authority may grant a licence authorising a person to generate electricity. Section 35 makes it clear that

“the Authority may modify the standard conditions of licences of any type”.

The only point in that legislation in which the Secretary of State has a hand is in section 35(5):

“If…the Secretary of State directs the Authority not to make any modification, the Authority shall comply with the direction.”

That is the sole power that the Secretary of State has in that arrangement about the granting or modification of licences. Apparently, the Secretary of State can countermand, after the fact. The authority might have made a modification to a licence, and the Secretary of State can say, “No, that is a bad idea.” If the Secretary of State so defines, with certain parameters, that does not happen.

This clause, however, places that entire arrangement the other way round. The Secretary of State, for the purposes of CFDs, is able, in his or her own right, to modify particular licences. My puzzlement about the clause relates not only to the question of whether that is indeed a power too far for the Secretary of State in terms of what we have had for a long time as arrangements for granting and modification of licences, but to this question. If the clause were to become law, who would have primacy at that point in the modification of licences? I ask that because nowhere in the Bill are there any consequentials that repeal or modify those provisions in the Utilities Act 2000.

I looked in vain to see whether there were a number of consequentials. One would normally expect, at the end of a Bill, to see a number of clauses relating to repeals and modifications, but there is none, so the position appears to be that two different parties may both modify licences, and there does not appear to be any particular guidance or direction as to whose modification of what licence takes precedence. We therefore appear to have the position that there are two equal authorities relating to the modification of licences in this respect. Although it is true that the Secretary of State can subsequently come back to the authority and say, “You shouldn’t have modified that licence,” it is also the case that the Secretary of State may be in the position of saying to himself that he should not have modified a licence. That is according to the way the legislation appears to be set out at the moment.

My preferred view is that the Secretary of State should not have the power to modify a licence under this clause, because that appears to conflict with what has been the case for a very long time. But if the Secretary of State is to have a power to modify licences, I would have expected at the very least that the apparent confusion over who does what when, who has primacy and what should happen when someone does what, should be urgently clarified and legislation should be put forward that made that clear. If that does not happen, we are in a state of considerable continuing confusion. In line with the theme that we have been addressing throughout the proceedings on the Bill in Committee, one thing that is clearly very important in terms of the path forward for investors, confidence in the market and all those things, is that people know where they stand. I suggest that it is fairly clear that people potentially do not know where they stand.

Perhaps a detailed explanation will be put forward—[Interruption.] I think it might be about to. But in the absence of a detailed explanation, I hope that the Minister will take this point away, consider it, see whether there are problems that need rectifying and, if there are, ensure that suitable amendments can be brought forward before the Bill completes its passage, so that at least we have clarity, even if the Secretary of State has provided to himself powers that I personally think should not go in that direction.

Photo of John Hayes John Hayes The Minister of State, Department of Energy and Climate Change

As ever, the hon. Member for Southampton, Test makes an interesting point that adds value to our consideration. Of course, he is right that previous Acts did indeed give the Secretary of State the power to modify licences, and not just the one to which he referred, by the way. The answer to his fundamental question, therefore, is that the last modification would have legal force, so the primacy lies with this Bill should it become an Act. The flexibility for the Secretary of State to make such modifications in the course of the scheme is, I think we would all agree, necessary to ensure that account is taken of changes and that the settlement mechanism remains appropriate, in the light of those changes, over the life of the CFD. We do not, therefore, believe that that could be a time-limited power. The reason for that is that we understand that this is a dynamic process. I think that it was the hon. Member for Southampton, Test who said at an earlier stage of our scrutiny that this was the beginning of a journey, not the end. Of course, he is right. When he began his contribution, I thought of T. S. Eliot, who said:

“Time present and time past are both perhaps present in time future”.

Just to emphasise the fact that parliamentary scrutiny is critical to this matter, clause 44 provides that the Secretary of State may only make licence or code modifications if they are first laid before Parliament for 40 days and if neither House disapproves the measure during that time. That should ensure that appropriate parliamentary scrutiny will be exercised of this power. I have received some inspiration that allows me to inform my response more specifically. The most recent modification under either Act will take primacy. It does not necessarily have to be under this Bill, but under either Act. I want to put that on the record, so that it is entirely accurate.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Notwithstanding that particular point about which piece of legislation takes primacy over another, which I take on board, is not it the case that one would expect that in terms of the clarification of where a particular piece of legislation stands in relation to another, there would be consequentials saying that this particular clause is repealed, discontinued or substituted by another clause? That is what one expects to see in such legislation and not an assumption that one piece of legislation has primacy over another, true though that may be. Is not it the case that in this particular piece of legislation, that is wholly absent?

Photo of John Hayes John Hayes The Minister of State, Department of Energy and Climate Change

I am not sure whether I agree with that. The hon. Gentleman knows very well, as you do Mr Leigh, that if an Act is replacing legislation, superseding earlier legislation, that would certainly be true. As I have told the Committee, the inspiration that winged its way to me as I was considering Eliot, is that the latest modification to a licence under either Act could apply, but I am not sure whether the standard mechanism that is often used in a Bill, which the hon. Gentleman identified, would, in these terms, apply. If I might just concede this point, it would have been very helpful for that to have been made crystal clear in the explanatory memorandum. I will take the matter away and think about whether I need to write to the Committee to reinforce the legal points that I have tried to make clear here as the basis of his inquiry. With that, given that

“in my beginning is my end”,

I will conclude so that we can make progress.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.