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Hon. Members: Object.


Order read for resuming adjourned debate on Question [23 January],

Hon. Members: Object.


Motion made,

That, for the current Session of Parliament, Standing Order No. 152 (Select committees related to government departments) be amended as follows:

Line 40, before the word 'European' insert the words 'Environmental Audit Committee or with the'.
Line 50, before the word 'European' insert the words 'Environmental Audit Committee or with the'.
Line 52, at the end insert the words:--
'(4A) notwithstanding paragraphs (2) and (4) above, where more than two committees or sub-committees appointed under this order meet concurrently in accordance with paragraph (4)(e) above, the quorum of each such committee or sub-committee shall be two.'-- [Mr. Dowd.]

Hon. Members: Object.


Motion made,

8 Feb 2001 : Column 1170

Hon. Members: Object.


Didcot Structure Plan

7 pm

Mr. Robert Jackson (Wantage): I rise to present two petitions on the same subject. My position is a delicate one because one of them calls on the Secretary of State for the Department of the Environment, Transport and the Regions to call in plans for the proposed expansion of Didcot in my constituency, while the other asks him not to do so. It is my role, as the Member of Parliament representing these petitioners, to represent all of them--whatever their views--without fear or favour, which is why I find myself in an interesting position this evening.

For the record, I shall describe the two petitions. One of them--it is wrapped in elegant green ribbons--comes from the campaign for a sustainable Didcot. It carries some 3,000 signatures. It prays that the Secretary of State should

The other petition, which is bound in an equally elegant green ring-binder, comes from the group of 13 parishes and carries 2,607 signatures. It prays for

that is Oxfordshire--

May I put it on record that the painful dilemma that is reflected in these contradictory petitions arises from the Government's requirement that Oxfordshire must accommodate another 40,000 houses by the year 2006, with the prospect of yet more thereafter?

Madam Deputy Speaker (Mrs. Sylvia Heal): Order. The hon. Gentleman must confine his remarks to the petitions. He must not make a speech.

Mr. Jackson: I shall present the petitions, Madam Deputy Speaker.

To lie upon the Table.

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8 Feb 2001 : Column 1171

Gas Prices

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Dowd.]

7.3 pm

Mr. Jonathan Shaw (Chatham and Aylesford): I am grateful for the opportunity to bring to the attention of the House the damage being done to United Kingdom manufacturing industry by the massive hikes in wholesale gas prices. The issue is of great concern to many Members on both sides of the House. I pay tribute to my hon. Friend the Member for Selby (Mr. Grogan), who kick-started expressions of concern in the House by tabling an early-day motion a couple of months ago.

I am pleased to see my hon. Friend the Minister for Energy and Competitiveness in Europe in his place, because I know that he and the Government take the issue extremely seriously. When I led a delegation of energy-intensive users to see my hon. Friend a couple of weeks ago, it was clear that he understood the issues and was determined to act sooner rather than later. We saw that action the following day, when my right hon. Friend the Secretary of State for Trade and Industry announced that Commissioner Monti had acceded to the Government's request to investigate allegations of anti-competitive behaviour by companies using the interconnector pipeline between Britain and Belgium. That was a very welcome announcement indeed. I hope that my hon. Friend the Minister will be able to provide more detail about that investigation and--which is most important--say when it is likely to report and whether the Government will consider referring the matter to our own UK Competition Commission.

The backdrop to this debate is a manufacturing industry with contrasting fortunes. The pain and anger felt by communities in and near steel-producing areas at Corus's recent announcement of massive job losses have been voiced both inside and outside the House. Of course, that followed the disbelief of Vauxhall workers at Luton who learned of their fate on local radio. Both are examples of the fragility of part of our manufacturing base and of appalling industrial relations. I should certainly like to add my support to the calls for legislation on information and consultation that were made in Westminster Hall last week.

In contrast to that misery, other announcements have resulted in much celebration. Major investment by Nissan in the north-east, Ford at Bridgend and Vauxhall at Ellesmere Port have secured well-paid jobs for the foreseeable future. Without doubt, however, the most serious decision was that of Corus, the sheer scale of which will reverberate far beyond the immediate community. The difficulties have mostly been attributed to the strength of the pound and the fall in world orders. However, that is not the whole picture.

Steel is one of five major energy-intensive users, the others of which are cement, glass, chemicals and paper. With the exception of cement, all are major users of gas and all are being ripped off. In the past year, wholesale gas prices have doubled. Gas companies are making massive profits while manufacturing is getting caned. The combined increase in the cost to energy-intensive users has added £10 million a week--or £0.5 billion a year--to the bills of those valuable and vital industries in the

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UK. The bills of the chemical industry have gone up by £300 million; those of the steel industry by £90 million; and those of the glass industry by £10 million a year.

Paper is the greatest constituency interest for me; nearly 1,000 people are employed in the paper and board mills of Chatham and Aylesford, producing 1.4 million tonnes per annum--the largest single concentration anywhere in the UK. The paper industry has seen the cost of gas go up by £50 million a year.

At a time when our manufacturing industry is meeting the challenges of environmental legislation and the weakness of the euro, gas prices in the UK should provide it with a competitive edge. That used to be the case. The UK's competitive gas market was achieved through a lot of hard work. We are one of the few countries to be self-sufficient in their gas requirement. Until last year, our prices were lower than those in the rest of Europe. A typical paper mill bought gas at 13p a therm, but that has now doubled to 26p. UK industry is being charged more for its gas than our competitors in Europe, where there is not a competitive market and where gas prices remain fixed to oil prices.

The big question is why prices have risen so dramatically and why they are higher in the UK than in mainland Europe? In an attempt to explain that, the UK Offshore Operators Association--the industry body for oil and gas--last month commissioned an independent report by ILEX Energy Consulting Ltd. entitled "What influences Gas Prices in the UK and why have they increased through 2000?" That report was produced in direct response to the criticisms of many, including the energy-intensive users. It said that demand for UK gas was increasing as a result of exports to Ireland and the continent through the two interconnectors. It rightly pointed out that there is capacity to export nearly 30 billion cu m per annum. To put that in context, the report goes on to say that total gas demand in Great Britain, without exports, is currently about 90 billion cu m. What the report does not say is that last year the interconnector's full capacity was never reached--nowhere near it. The highest point, I am informed, was 17 per cent. of capacity.

Some of the exports would have been sold under predetermined contracts, which would not have affected price. One must ask what proportion of the amount exported was under predetermined contracts. We do not know. Only those who own and run the interconnector, which in the main are the gas producers, know. Can my hon. Friend tell the House whether the Commission will examine that issue in its investigation?

The UK competitive market, with a self-sufficient supply, has its price determined by a market in Europe that is not competitive. I know that my hon. Friend is determined to press ahead in Europe so that competition will be opened up. That may be years away, and in certain quarters it will be resisted. In the meantime, why should UK manufacturing suffer?

According to the industry's independent report, to which I referred earlier, supply is outstripping demand, even when exports are taken into account. The authors of the report do not know why such a large gap has opened up between the UK and Zeebrugge prices. The effect of the interconnector at best provides inadequate evidence to justify the gas price increases, and at worst is being

8 Feb 2001 : Column 1173

used as a means of manipulating the market. If the interconnector was affecting the market, why has cheaper gas not flowed back to the UK?

The effect of the rises is hitting manufacturing, causing uncertainty and denting confidence among high gas users. One of the larger mills operating in the UK employs technical experts to study the market for the best prices. All have been unable to provide a satisfactory reason for the increases. It needs to be clearly established whether companies are using the interconnector to push prices in the UK up to European levels and above.

My right hon. Friend the Secretary of State for Trade and Industry was right to act as he did. I know from conversations with those in the industry that his response was warmly welcomed. Can my hon. Friend the Minister tell us whether the investigation will examine ownership? There should be greater transparency in the gas industry, particularly as there are only a few key players whose interests extend throughout the European natural gas industry.

The dominant forces in the European industry are four large producers, which have a substantial downstream interest. BP Amoco, which has 19.1 per cent. of UK output, has a 25.2 per cent. share in Ruhrgas, the dominant German company. Exxon Mobil accounts for 15.2 per cent. of UK output, and has a 25 per cent. stake in Gasunie, the Dutch monopoly, and 22.5 per cent. in the dominant German company. Shell, which accounts for 9.4 per cent. of UK output, has a 25 per cent. share in Gasunie, 15 per cent. in Ruhrgas and 25 per cent. in Thyssengas, the German regional monopoly. TotalfinaElf, which accounts for 8.1 per cent of UK output, has a 50 per cent. share in both the French transmission companies. It is no coincidence that these main players also own the interconnector. It is a pretty cosy picture.

For some time, experts have been expressing concern to the Government about the European structure. My hon. Friend's predecessor received a letter from Mr. Patrick Heren of PH Energy Analysis Ltd., who is highly regarded in the field. He stated:

Does my hon. Friend agree with that observation, and does he believe that the existing structure is conducive to achieving the competitive market for gas that we want to see throughout Europe?

Soaring gas prices have consequences that are more damaging than is immediately apparent. In the paper industry, there have been important moves towards installing more combined heat and power plants in mills. Almost 100 mills operate in the United Kingdom, 20 of which have invested in CHP since 1990. The average cost of a CHP plant is about £10 million. Such investments take years to pay back, but competitive gas prices have been an incentive. Some investments have been much larger. Shotton paper mill, which has a capacity of about 500,000 tonnes of newsprint per annum, spent £80 million on a new CHP plant.

The climate change levy is an added incentive for paper mills to invest, as it exempts good-quality CHP. However, I know of two UK paper mills that have cancelled the

8 Feb 2001 : Column 1174

development of CHP plants since gas prices rose so dramatically. CHP development is crucial to our commitment to cut CO 2 measurements to 20 per cent. of 1990 levels. In 1990, before the installation of a CHP plant, Aylesford Newsprint in my constituency produced 1.2 tonnes of carbon for every tonne of paper. After the installation of the plant, 0.44 tonnes of carbon are produced for every tonne of paper. The site is operating some 450,000 tonnes of paper every year, so the savings to the environment are clear.

A finger of suspicion is pointing at gas producers. Manufacturing believes that it is being ripped off by anti-competitive practices. Many questions need answering, including those on the ownership structure in Europe. We have plenty of gas suppliers and, as I said, supply is outstripping demand, but our industries our suffering. The matter needs resolving quickly if we are to avoid manufacturing job losses. The Commission's investigation should be concluded sooner rather than later. I hope that my hon. Friend the Minister will reassure hon. Members that the Government will impress upon it the urgency of the matter.

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