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Lord Ezra: I support the amendment. In our Second Reading debate a number of us expressed anxiety about the relatively large amount that is written into licences and the relatively small amount that is written into the Bill. This is a good example of that situation. The obligation to supply must surely be fundamental in regard to such an important product as natural gas. People are entitled to have it supplied to them under fair and reasonable conditions. That should be written into the Bill.

The argument that there should be flexibility as a result of retaining in the licence the obligation to supply creates misgivings to my mind, as it did to the noble Baroness's mind. Would it be the intention of the Government or the regulator in due course to remove the obligation from licences? That would be the only meaning of the word "flexibility". It is included now, but could it be out at some future date? If so, that is a serious possible development. We would need firm assurances, and I cannot understand the case for not putting an issue as fundamental as the obligation to supply on the face of the Bill. If, nevertheless, the Government insist on keeping it in the licence then they ought to define clearly to us what they mean by "flexibility". If they mean what we think they mean, then we are justified in having serious apprehensions.

Earl Ferrers: I find it difficult to deal with this. I understand the concern of my noble friend and the noble Lord, Lord Ezra, in which there is considerable merit. At the same time, in bringing forward the Bill we must look to the future and consider the possibilities. It would be quite easy to give a concession like this because I do not believe that there is anything between us, on our present view of the market, in recognising that the obligation to supply is important. We all agree with that. However, I must resist that temptation. Although it is difficult for us now to foresee circumstances when the obligation to supply might become obsolete, none of us can totally rule out the possibility that one day gas will become like food, capable of being left wholly to the market. One goes down

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to the supermarket and food is important, but one chooses and buys where one wishes. It is not inconceivable that that could come in the future.

However, our main concern is a much more practical one: whether we have got the form of the obligation to supply right. It is a dilemma. If we have too tight an obligation to supply, as the Consumers' Association said, it could become a barrier to entry into the market, denying the customer the benefits of vigorous competition. On the other hand, if we have too weak an obligation, it would be ineffective. The appropriate form of the obligation could change with time or conceivably from one type of supplier to another. For example, Standard Condition 7 contains an important provision that will tackle the situation where taking on new customers could prejudice a gas supplier's ability to continue supplying his existing customers. There is, I think, agreement that there must be a provision to deal with that. In a competitive market, not all suppliers can, for example, have enough gas available to supply all 18 million consumers. But this provision might well need adjustment in the light of experience in order to avoid the risk of harm to either existing or potential future customers.

I am conscious of the concern that the obligation to supply might somehow be abolished without proper consultation or debate. That was the concern of the noble Lord, Lord Ezra. I do not believe that it is likely and we would not let it happen. The statute provides that no amendment can be made to licence conditions without a public consultation lasting for at least a month. Any variation in the standard conditions or any reference to the monopolies commission aimed at varying the standard conditions is subject to the veto of the Secretary of State. The Secretary of State should be accountable to Parliament for any use of that veto or failure to use the veto. It is inconceivable that the Secretary of State should allow the obligation to supply to be abolished behind Parliament's back.

However, for those reasons I do not believe that we could take the risk of putting ourselves in what one might describe as a legislative straitjacket, possibly putting at risk the objective of a lively and effective competitive market. We must have flexibility, with safeguards, and that is what occurs in the Bill. I am happy to reiterate that the Government consider it important, at least in the early stages of the market, that there should be published prices. That is why price schedules are provided for in draft standard condition 3 of the supply licence. That is just as binding on the suppliers as if it were in the Bill.

There is, however, a real risk that publishing prices may not work to the benefit of consumers in the longer term. In the industrial market schedules are not considered to be beneficial by many customers, as they would like to negotiate with British Gas. That wish is now to be granted with the suspension of schedules coming into effect at the end of the week. The general point here is not necessarily that all domestic consumers will want to negotiate their own prices but that in mature markets formal price schedules can tend on occasion to inhibit rather than promote competition—not least by the fact that they can encourage informal price matching.

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It has been suggested that domestic consumers would be unlikely to have the time or the information to negotiate separate deals. There is no evidence for that. People may not have got used to it yet, and they may not have done it yet, but that does not mean to say that they will not want to do it in the future. People are, after all, quite used to negotiating when they buy second-hand cars or when they go to a market. Some people rather enjoy it. There is no reason why a consumer who may take, let us say, 2,000 therms of gas a year should be considered incapable of negotiating, when one who takes 3,000 therms a year is presumed to be capable. There could well come a time—I do not say that that time has arrived—when the requirement for price schedules should be removed, either for the whole domestic market or for part of it.

It is possible that customers could benefit from different forms of marketing that did not include suppliers publishing and sticking to a list of prices. I give an example for the Committee to consider. Direct Line insurance has been very successful in giving customers individual price quotations by telephone. The important point is that we do not rule out those alternatives at this stage. At present they do not happen, but it is not impossible that in the future they might. We do not know how the market will develop. It would be much better to provide the flexibility for the future. I hope that the Committee will agree.

Lord Ezra: The noble Earl's points are very important, as are all the points that he makes. However, we are primarily concerned with having an orderly transition from one sort of market to another. The developments to which he refers could, if they ever occurred, take many years to come about. In the meantime, what is needed for the 18 million consumers of gas is to be assured that certain fundamental safeguards will be preserved. One of those is the obligation to supply in areas in which suppliers have indicated their intent and for which they have licences. Another, to which we shall turn later, is the publication of prices so that consumers can see that they are being fairly treated—just as one can make up one's mind, for example, in a petrol filling station where the prices are clearly shown, and a choice can be made between the different suppliers. It is essential that those fundamental safeguards should be in the Bill. No legislation lasts for ever. If some of the changes that the noble Earl envisages were to occur in the next decade, or in two or three decades, then at some future sitting of this House the provisions could be revised. I urge the Government to consider the need for a proper and effective transfer from one form of market to another, and for clear safeguards to be indicated on the face of the Bill.

7.15 p.m.

Baroness Gardner of Parkes: I am most grateful to the noble Lord, Lord Ezra, for his support. I am very interested in what my noble friend the Minister said. He seemed a little torn in that perhaps he does think that there is in part a case for the obligation for supply to be on the face of the Bill. Certainly, as to the point made by the noble Lord, Lord Ezra, in the time that I have been in this House this is the second gas Bill that we have dealt with.

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If that requirement were to be put on the face of the Bill, and the day comes, as my noble friend described, when life has changed for everyone, there can be another Bill then. We spend our lives amending legislation relating to matters that have changed over a period of time.

The point that my noble friend made about people becoming sophisticated is right. When I was on the board of a building society, it was quite remarkable how a 0.1 per cent. change in the interest rate meant millions or billions of pounds moving around in the financial world. That was quite unknown years ago. On the other hand, there are all those other people, those whom we want to protect, who write, saying, "My granny has had her account for 25 years and she has been left behind by all these changes." People have not kept up to date. As to the price strategy to which the Minister referred, people need information in order to be able to make comparisons. Even those sophisticates who, as he said, might get together in groups to organise their own gas supply will have to have a basis for comparison.

The fact that the obligation to supply was a very important feature of the previous Act leads me to think that, given the noble Earl's remarks, he may be able to think of some form of words that he could bring forward which would still retain the obligation of supply and put in the protection, and even (to use that horrid word) the flexibility that he believes is essential. Therefore, in withdrawing the amendment, I ask my noble friend to see whether the Government can find a way to get round this. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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