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Lord Clinton-Davis: My Lords, I support the amendment ably moved by the noble Lord. He has put forward a number of extremely salient points which cannot be divorced from the general expressions of concern—indeed, resentment—about certain actions affecting public utilities which have been expressed in recent months. Those expressions make it encumbent on the Government to address the issues that are set out in these two amendments.

The Government got themselves into an awful mess when referring to primary and secondary obligations when the matter was in another place. It is all very well to say, as the Government do, that this obligation towards consumers' interests is implicit. Unfortunately, they might have got away with that had it not been for the interventions of the Minister with responsibility in this area, Mr. Eggar. Unquestionably, he referred to this categorisation of interests: that primary interest was not that of the consumers; secondary obligations were the consumer interests.

How does one square talk of primary and secondary interests with the assertion made more or less at the same time that those are duties which can run alongside each other? That is what the noble Lord, Lord Ezra, seeks to recognise. However, because the matter was allowed to be confused by the Minister elsewhere, we now have to ensure that the public are not confused about it. I should have thought that the drafting before the House is consistent with what the Government have expressed, albeit in confusing terms as their purposes, their objectives.

I believe that what was said by my noble friend Lord Peston when we debated these matters in Committee is right: the consumer must be seen to come first. I hope that when the Minister replies to the debate he will recognise that that is not an unworthy objective. It is one which the Government should have no difficulty in

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accepting in principle. I find it incomprehensible that the matter was not addressed at a much earlier stage in the Bill.

However, I look forward to the Minister saying that this is an amendment which the Government are now able to accept both in principle and intent. The wording may be slightly wrong, but what we want to hear from the Minister is an acceptance in principle of what we state: that there is a need, because of the circumstances to which the noble Lord, Lord Ezra, and I have alluded, for ensuring that the confusion that has arisen is cleared up—and cleared up along the lines of the amendment.

4.15 p.m.

Lord Fraser of Carmyllie: My Lords, the noble Lord, Lord Ezra, has made much of the interests of the consumer being of the highest importance. I entirely agree with that. What concerns me is that the provisions of the clause that we propose achieve that objective in a balanced and tested way. However, I fear that the way in which the noble Lord puts it disrupts that balance.

It may be a little difficult if one considers these duties in terms of primary and secondary duties rather than in the context of ensuring that there is a supply of gas. That is the way in which we understand the clause to be framed.

The first duty—let me leave out "primary"; it is potentially confusing—is to secure so far as it is economical to meet them, all reasonable demands in Great Britain for gas conveyed through pipes and to ensure that all reasonable demands are met. That may not mention the word "consumer". But there is no doubt that the duty is to protect an important consumer interest; namely, to ensure that gas is available to meet demands. That seems a very obvious consumer interest.

The second duty is in essence to secure that licence holders can finance their business. Again, there may be no mention of the consumer, but that duty has two impacts on the director, both of benefit to the consumer. The first concerns who is licensed. The director has to consider whether they are able to finance their business. She must see evidence of reasonable financial soundness. That clearly is equally of importance to consumers.

The second impact of that duty concerns the licensee's terms of trading. That is at the heart of the regulatory system. In performing those further duties—to promote low prices and improve service—the director must do that subject to ensuring that companies are able to finance the licensed business. In our view, it would not be in the interests of consumers if the director were to pursue what might be described as "consumer objectives"—narrowly defined—so aggressively that companies went out of business. It is not her duty to prop up inefficient companies, but she should not drive suppliers out of business by setting targets that they are unable to meet.

The third duty is to secure effective competition. Again, our clear view is that that is a benefit to consumers by providing them with choice and the opportunity of lower prices. As the noble Lord will

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know, prices have fallen further in the competitive industrial gas market than in the monopoly domestic market that exists at present.

In essence, there is nothing between us. We believe that the consumer should be put first, and that we have done that. We have done it with a set of duties aimed at ensuring that there is a viable competitive market meeting consumer demands. Then we set out more detailed consumer protection duties in the clause. They are necessary, subject to the first requirement that there should be a viable competitive market. I hope that the noble Lord will be satisfied that we are not confused about the way in which it is set out, but will realise that the way in which it is arranged will ultimately be in the best interests of the consumer.

Lord Ezra: My Lords, I thank the noble and learned Lord for that explanation, which is similar to the one given to me by his noble colleague at an earlier stage. However, I am still concerned about it. The Minister has set out logically that we must have a supply; that we must ensure that people handling the supply are financially viable; that we must ensure that there is effective competition; but also that the interests of consumers are safeguarded in all that. There is a clear distinction in the wording of the Bill on page 1 between the first three objectives, which are grouped under a single heading in subsection (1), and the relegation of the consumers' interests to a secondary position. What Mr. Eggar said in another place is difficult to follow: that in the event the regulator would probably consider everything in subsections (2) and (1) on a par. However, that is not what the Bill says and people will go by the Bill.

If the Government were to move a little and cut out the phrase in subsection (2),

    "Subject to subsection (1) above",

and simply continue with (d),

    "to protect the interests of consumers",

so that there was a certain logical progression, much of the concern of those who favour putting greater emphasis on consumers would be removed. The difficulty is with the emphasis and clear distinction between the protection of the interests of consumers on the one hand and all the matters contained in Clause 4(1) on the other. I consider the promotion of,

    "efficiency and economy on the part of persons authorised"

to be of equal importance. I should like to see all those points listed in one series. I do not necessarily suggest that the interests of the consumer should come first. I should like to see that, but there is a certain logic in ensuring that there is a supply; that it is properly handled; that it is financially viable; that there is competition; and that the interests of consumers are protected. I can see nothing wrong with doing that.

I should like to know whether the noble and learned Lord would be prepared to reflect on that and perhaps bring forward an amendment at the next stage which would achieve those objects. It would remove the feeling of apprehension that somehow the protection of the interests of consumers is regarded as being of secondary importance. The Government have denied

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that. Let them demonstrate that denial by making a change in the wording. I ask the Minister to address that point.

Lord Fraser of Carmyllie: My Lords, with the leave of the House, perhaps I may reply. There is still confusion between us. I do not accept that we have in any sense relegated the consumer duties in the way that the noble Lord continues to insist. However, if he would accept that I will make no commitment on the matter, I shall look again at the way in which the clause is framed. Having addressed an argument to him in which I indicated that I do not believe there is relegation of consumer interests, he will appreciate that I cannot offer a commitment at this stage.

Lord Ezra: My Lords, if the noble and learned Lord is prepared to reconsider the point and come forward with a suggestion at the next stage, I shall be happy to withdraw the amendment. I look forward with great interest to what I am sure will be a helpful proposal at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 4 and 5 not moved.]

The Earl of Cranbrook moved Amendment No. 6:

Page 2, line 18, after ("of") insert ("—

The noble Earl said: My Lords, Amendment No. 6 proposes, together with Amendment No. 7, to add the words:

    "the use of gas conveyed through pipes",

as one of the duties of the regulator. It will be one of the points that the regulator will have to take into account. The debate which we have just held emphasises the importance of gas to consumers. I was not aware of it but the noble Lord, Lord Ezra, told us a moment ago that the majority of British households depend upon burning gas for heating, warmth and probably cooking. The net effect is that it is the consumer who burns the gas.

In my previous comments on an earlier amendment, I referred to the importance of the Government's climate change programme. A key element of it is the control and management of emissions of carbon dioxide. Burning gas produces carbon dioxide. Thus, around the country hundreds, thousands and, no doubt, millions of consumers contribute to national carbon dioxide emissions by burning gas, by using the product delivered to them by pipes. That is what we are talking about. Undoubtedly, it has a powerful environmental impact in contributing towards the carbon dioxide load in the atmosphere.

My basic argument has not changed. Any source of carbon dioxide in the country needs to be managed. Efficiency is one way in which emissions can be abated and there are many others. Therefore, I come up against the problem which concerns me: how does the national policy and the national strategy for the control of carbon dioxide emissions feed through to the millions of us who consume gas in our own houses, in order to keep ourselves warm, cook our food and have warm baths? How do we feed that through, if not through the regulator? If the regulator is already given the duty to

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take account of the effects on the environment of activities connected with the conveyance of gas through pipes, he merely has a duty to have regard to the effects on the environment of the laying of the pipelines and related activities. These are undoubtedly important environmental concerns, but the primary environmental concern must be the use of gas by consumers. I hope I have made that point. I strove to make it earlier and the reply which I received (at col. 442 of Hansard for 22nd June 1995) from the Minister on the Front Bench at the time was simply:

    "I am not keen on that".

I genuinely believe that the topic deserves fuller discussion and that the policies for which my noble and learned friend is now responsible need to be laid out for the benefit of those who will read this debate in Hansard. I very much hope that my noble and learned friend will say that he has no problem in accepting the amendment. If not, I hope that he will make it clear that somehow or other this important issue is already covered. I beg to move.

4.30 p.m.

Lord Fraser of Carmyllie: My Lords, I am grateful to my noble friend for raising the question of whether the director's duties should extend to the effect on the environment of the use of gas. While my response may be summed up by saying that I am not keen on what my noble friend proposes, I hope nevertheless that I shall extend to him the courtesy of a considered argument.

My first point is this. The principal issue in this area is the efficient use of gas. The director already has a duty under the Bill to promote the efficient use of gas conveyed through pipes. It is an important duty; and it is on the basis of that duty that licences contain provisions designed to promote energy efficiency in the gas market.

These include not only the requirement on suppliers to provide energy efficiency advice, but reforms designed to harness the power of the market in favour of energy efficiency by providing incentives to suppliers to compete in what might be called "warmth solutions" rather than simply therms of gas. We therefore feel that it is difficult to know what a duty in respect of the environmental impact of gas use could add which is not already covered by that efficiency duty.

It might perhaps extend to giving the director a duty to seek to raise prices in order to reduce consumption. But it appears to us that decisions of that nature ought to be for government, through the instrument of taxation, and not for the independent regulator. As my noble friend will appreciate, raising taxes for that purpose is not an approach which immediately attracts widespread public support.

The other difficulty that we have with a duty of this nature is that one ought not to look at the environmental impact of burning gas in so far as it goes beyond the questions of efficient usage without considering the alternatives. Most competing fields, as I am sure my noble friend will acknowledge, have significantly greater impacts on the environment because gas is a low carbon fuel which contains virtually no sulphur and does not create noxious products if burnt properly.

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A duty for the gas regulator to look at the environmental impact of burning gas alone would, we believe, have a distorting effect on the director's judgment. Looking at the environmental impacts of all fuels strays dangerously into territory that ought to be occupied by Ministers.

Our conclusion therefore is that what ought to be done in this area is achieved by the director's duty in respect of the efficient use of gas. A duty in respect of the impact of the use of gas on the environment would add little; where it might add anything further, it would risk straying into areas which are either very wide or politically very sensitive.

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