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Lord McIntosh of Haringey moved Amendment No. 154:



("(1A) Before making an order under subsection (1) the Secretary of State shall give notice--
(a) stating that he proposes to make such an order and setting out the terms of the proposed order;
(b) stating the reasons why he proposes to make the order in the terms proposed; and
(c) specifying the time (not being less than 28 days from the date of publication of the notice) within which representations with respect to the proposals may be made,
and shall consider any representations which are duly made in respect of the proposals and not withdrawn.
(1B) The notice required by subsection (1A) shall be given--
(a) by serving a copy of it on the Authority and the Council; and
(b) by publishing it in such manner as the Secretary of State considers appropriate for bringing it to the attention of those likely to be affected by the proposed order.").

The noble Lord said: I have just spoken to this amendment. I beg to move.

On Question, amendment agreed to.

Clause 28, as amended, agreed to.

Clause 74 agreed to.

Clause 85 [Exemptions from gas licensing]:

Lord McIntosh of Haringey moved Amendment No. 155:


    Page 83, line 4, at beginning insert--


("( ) In subsection (1) of section 6A of the 1986 Act (exemptions from prohibition) the words ", after consultation with the Director," shall be omitted.
( ) After subsection (1) of that section there is inserted--
"(1A) Before making an order under subsection (1) the Secretary of State shall give notice--
(a) stating that he proposes to make such an order and setting out the terms of the proposed order;
(b) stating the reasons why he proposes to make the order in the terms proposed; and
(c) specifying the time (not being less than 28 days from the date of publication of the notice) within which representations with respect to the proposals may be made,
and shall consider any representations which are duly made in respect of the proposals and not withdrawn.
(1B) The notice required by subsection (1A) shall be given--
(a) by serving a copy of it on the Authority and the Council; and
(b) by publishing it in such manner as the Secretary of State considers appropriate for bringing it to the attention of those likely to be affected by the proposed order."").

The noble Lord said: I have spoken to this amendment. I beg to move.

On Question, amendment agreed to.

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Clause 85, as amended, agreed to.

Clauses 29 and 30 agreed to.

4.45 p.m.

Clause 31 [Electricity licence conditions]:

Lord McIntosh of Haringey moved Amendment No. 156:


    Page 29, line 9, at end insert--


("(4A) After subsection (3) there is inserted--
"(3A) Conditions included in a transmission licence or a distribution licence by virtue of subsection (1)(a) may require the holder, in such circumstances as are specified in the licence--
(a) so to increase his charges for the transmission or distribution of electricity as to raise such amounts as may be determined by or under the conditions; and
(b) to pay the amounts so raised to such licence holders as may be so determined.").

The noble Lord said: This amendment addresses a point raised by the noble Lord, Lord Currie, at Second Reading. He rightly noted (at cols. 1167-8) the absence from the Bill of measures relating to the provision of a supplier of last resort in electricity. This relates to the appointment of a supplier to take over the customers of another supplier whose licence has been revoked or suspended by the authority other than with his consent.

As in gas, we propose that there should be two routes through which funds might be made available to finance the costs of the appointment of a supplier of last resort.

First, each supplier will be required to post some form of approved bond with a person appointed by the authority. These bonds might take the form of, for example, insurances or parent company guarantees. In the event that a supplier's licence is revoked or suspended and one or more supplier of last resort is appointed, the bond of the failed supplier may be called to finance the additional costs of the appointee.

Secondly, standard conditions in transmission and distribution licences will permit the authority to require licence holders to increase the charge they make for the transmission and distribution of electricity and to pay the moneys raised to licence holders as directed. It is intended that this levy route will be used only in the event that the moneys which could be raised by calling the failed supplier's bond were not sufficient to cover the additional costs of the supplier of last resort.

The levy route is needed because the costs of a supplier of last resort are not readily calculable in advance and so it is not clear that there is a sensible level of bond cover which could be set which would cover every eventuality. The levy spreads the top-up costs across the whole of the supply industry.

We want it to be clear on the face of the legislation that the power exists for the authority to raise such a levy. The present power in the Electricity Act (Section 7, as amended by Clause 31 of the Bill) to include conditions in a licence condition does not give that clarity. Parliament took a similar view in respect of the

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Gas Act provisions when considering the Gas Act 1995. It used that Act to amend the Gas Act 1986 to make express provision of just this sort.

So the levy power which this amendment creates is not new. It replicates in electricity the existing gas provision and so allows for electricity licence conditions--and hence the supplier of last resort arrangements--to be established to mirror those in gas. Indeed, the draft standard conditions of electricity licences already contain both the bond and levy conditions which I have described. I beg to move.

Baroness Buscombe: We should like to express concern with regard to the amendment. As we read it, it would permit the imposition of additional charges for the transmission or distribution of electricity. It would allow licence conditions to be imposed on a transmission or distribution licence which require the licence holder to increase charges to raise an amount set in the condition, and then to pay that money to other licence holders as directed by the authority.

The amendment refers, as indeed does the clause, to increased charges,


    "for the transmission or distribution of electricity as to raise such amounts as may be determined by or under the conditions; and ... to pay the amounts so raised to such licence holders as may be so determined".

We are concerned about this provision. What does it actually mean?

Distributors are under a duty to operate the network in a manner that can demonstrate a level playing field. They are in effect under a duty to keep their charges down. But then along comes this stealth tax, in the form of what we consider to be a very vague power.

Lord McIntosh of Haringey: I am disappointed to hear the reference to "stealth tax", which has not previously arisen in relation to the Bill.

First, the provisions in the amendment are already contained in the Gas Act 1986, as amended by the Gas Act 1995. They exactly mirror the provisions in those Acts, which were passed by the previous administration. As I have said, there is nothing new in this provision; it is simply being extended to electricity.

What the supplier of last resort who comes in to receive the money is doing is to provide continuity of supply when a supplier fails in whatever way. The provision must be left at large, even though it is intended to be used for this single, narrow purpose.

In determining the standard conditions of electricity and gas licences under powers in Clauses 32 and 80, the Government intend that this power shall be used only for the purposes of supporting supplier of last resort arrangements. The purpose of the power is left at large because it may be useful in some unforeseeable way in the future, but there are safeguards against its being used in the way that the noble Baroness, Lady Buscombe, fears.

If the authority decides that it wishes to use the power for other purposes, it will need to use the licence modification procedures set down in the Bill so as to

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amend existing licence conditions or introduce further conditions providing for the use which may be made of any levy raised. As I said in introducing the amendment, provision is made for the amendment in the draft conditions which have already been published. The licence modification procedures require that the Secretary of State be consulted and provide him with a power to veto the authority's proposal. If that veto is not exercised, the authority must still gain sufficient support within the industry for its proposals. Failing that, a reference to the Competition Commission followed by an adverse public interest finding would be necessary before the new use for the power could be established in licence conditions.

I hope that that convinces the noble Baroness not only that the powers, which have existed for a very long time in the gas industry, are not likely to be abused, but that the amendment and other provisions in the Bill make it certain that they cannot be used other than for the single and narrow purpose of ensuring continuity of supply of electricity to the customer.


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