Electricity Market (Scotland)

Part of the debate – in Westminster Hall at 3:12 pm on 8th September 2004.

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Photo of Mike O'Brien Mike O'Brien Minister of State (Trade), Department of Trade and Industry, Minister of State (Trade), Foreign & Commonwealth Office 3:12 pm, 8th September 2004

Let us see where we are at the end of the consultation process and how the costings work out then. The potential contribution of Shetland and the whole of the northern part of Scotland is enormous. We need to ensure that we establish an energy policy that will realise that potential, for the benefit of all the people who use that electricity and power. That is part of the process of working our way through the arguments. We have taken the view that Ofgem should have a certain degree of independence, in order to be able to work through the arguments in a sensible and objective way. We have taken some powers to intervene if necessary. However, we have attempted to put in place a system that can allow all the issues to be considered in a way that is not seen to be at all politically biased and in which, to some extent, the substance of the real arguments is seen to be considered. We must allow that process to proceed.

The hon. Member for Banff and Buchan suggested that we were not enthusiastic about Beatrice and Talisman, so before I leave that issue I reiterate that the Department of Trade and Industry put £3 million into researching the project. The Department has strongly backed the scheme, so let there be no suggestion that £3 million is not greatly supportive—in my book, £3 million of taxpayers' money is considerably supportive.

Furthermore, BETTA provides many benefits for Scottish generation. There will be financially firm access to a Britain-wide market. Another important point is that under BETTA the cost of upgrading the Scottish transmission system will be spread across all British users. Without BETTA, the cost of that work would have to be recovered solely from the users of the Scottish transmission system. We would be talking about hundreds of millions of pounds falling just to Scotland, which would make charges rocket. The hon. Member for Banff and Buchan needs to consider for a moment what the situation would be like for Scottish generators if Scotland were independent, had its own market and was trying to export the majority of the electricity that it produces.

In addition, there would be a single, tangible set of rules under BETTA, replacing the vast variety of different rules we have now. It is better to have a straightforward system, which we are trying to put in place, than the complexities that the hon. Gentleman seems to prefer. Under that system generators would continue to face a number of different charges and the costs of upgrading the transmission system would be recovered solely from the small base of Scottish users, which is not right. That is why we want to put in place a better system. Perhaps the hon. Gentleman's aim is to inflict extra expense and extra bureaucracy on Scottish generators. That would surprise me, because I do not think that that is his aim, but that would be the outcome of the concerns that he has expressed if he does not get the balance right in the argument.

BETTA will also allow Scottish generators to provide services to the national grid, the transmission system operator, especially by providing balancing services. Those contracts can be lucrative and Scottish generators have not been in a position to realise the value from those services before. On a number of fronts, far from being bad for Scottish generators, the creation of the British market in fact provides a range of new and exciting opportunities for Scottish generators and will therefore develop the Scottish electricity industry.

We have heard some statements that I have concerns about, although we do not have time to deal with all of them. For the record, however, I should like to make it clear that the transmission charges are neither set nor capped by the Energy Act 2004. The Government, with Ofgem, consulted on the criteria to govern the transmission charging methodology. We very much support a methodology that is cost-reflective and promotes competition. We also concluded that National Grid should be asked to develop a methodology to meet those criteria. National Grid is still consulting on its methodology, and it would be for Ofgem to decide whether to approve it in the final instance. However, I note the valid point that the hon. Member for Banff and Buchan made about the nature of those proposing the methodology. That is something that we need to consider. I am sure that National Grid would be interested to receive the views of all hon. Members on the issue and I hope that they will be prepared to put those views forward.

Things are not yet finalised. We are still very much in the discussion phase and the Government are still listening to the points that hon. Members from Scotland are raising. We are concerned to ensure that Scotland realises its potential for energy generation and renewables, which we certainly back and want to be a success. Our main interest is to ensure that the Scottish consumer benefits, and when we look at the changes overall, we see that the Scottish consumer will indeed be the major beneficiary.