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Lord Borrie: I should like briefly to welcome the amendment. Perhaps I may say on behalf of my noble friend Lord Currie of Marylebone, who expects to be here for most of the discussion in the Committee today, that I am sure that he too would welcome the amendment, because it fills the gap that my noble friend the Minister has explained: that gap between the position in the gas industry and the position in the electricity industry.

The amendment is to deal with a very limited situation that one hopes will very rarely, if ever, arise. The noble Baroness, Lady Buscombe, will recognise that in a competitive situation--and we are all in favour of the increased competition that has already been brought about and will be developed further--there is bound to be at any rate the possibility of a supplier's failing and being unable to meet the needs of customers. The notion of the supplier of last resort is intended to fill that gap and ensure that whoever becomes the supplier of last resort and therefore ensures that customers are not without supply will be compensated.

Given the qualifications, and the limited occasions when the provision would apply, this is a helpful equating of the existing position under the Gas Act 1986 with the position in electricity.

Lord Jenkin of Roding: Like the noble Lord, Lord Borrie, I completely understand the purpose for which the amendment is required. It seems to me that it is very necessary in the new arrangements, as it was in relation to gas in the former arrangements. The problem is how it is to be quantified. In the end, the levy has to be of a sum of money. No doubt the supplier of last resort will provide the Government with his estimate of how much it will cost him to take over and re-establish the supply. Surely there must be some way of testing that: some way in which there can be, as it were, an arbitration between what he will ask

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for and be paid and what the rest of the industry will have to find. It is not just a question of the principle; it is a question of the quantum.

Lord McIntosh of Haringey: Of course, this is a last resort of last resort. First, it is a last resort in the sense that we do not really expect electricity companies to go to the wall and fail and be in a position in which they are unable to meet the needs of electricity customers.

Lord Jenkin of Roding: I recall when I was Chief Secretary to the Treasury having to pick up the bits when Rolls-Royce went to the wall.

Lord McIntosh of Haringey: That was the case.

The noble Lord asked for quantum. I am saying that, first, we do not expect it to happen, because we expect the licence conditions to be sufficient to secure what is after all an objective of the authority under the Bill, which is that suppliers shall be in a financial position to meet their obligations.

After that, the next option is that the supplier of last resort shall post some form of approved bond with a person approved by the authority. That could be insurances or parent company guarantees, as I made clear. We think that in the remote case of a supplier's failing, it is most likely that it would be possible to achieve continuity of supply through a bond. For example, a parent company is likely to wish to support a supplier of last resort.

The last resort of last resort is that one has to go to a levy. We have had to provide a rather broader power, precisely because we do not know what the levy would be. Perhaps it is a good thing that I cannot give a very precise answer on this question. It is because there has been no practical experience in the gas industry, since the 1986 Act was passed, of having to appoint a supplier of last resort and having to cover that person's additional costs.

The supplier of last resort conditions in gas supply specify what a supplier appointed by the director to be a supplier of last resort must do. He is required to use all reasonable endeavours to secure that a new meter reading is taken at the premises of each of his new customers within 14 days of his appointment and to send a notice to all his new customers explaining that their supplier has changed and setting out the terms on which they are now being supplied. Many of the customers transferred from the previous supplier probably would not grasp what was going on anyway. The supplier of last resort would be in a reasonable commercial situation.

I know that that does not address the quantum question. All I can say about how large the levy would be is that it will be as small as possible and that for a levy to be proposed to the industry as a whole the authority would have to justify in the circumstances of

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each case how much money was required. By definition there cannot be a general answer to the question that the noble Lord, Lord Jenkin, asks.

Lord Jenkin of Roding: I am very grateful to the noble Lord for that very helpful description. In the last resort, is this a justiciable issue? Could it be tested in the courts?

Lord McIntosh of Haringey: All the authority's decisions are in the end justiciable.

In my response to the noble Baroness, Lady Buscombe, I set out the ways in which the power would have to be used. In particular, I referred to the licence modification procedures and the need to consult the Secretary of State and gain sufficient support within the industry, as well as the possibility of a reference to the Competition Commission.

As to how far those matters apply to the issue of the size of the levy, which is the particular point raised by the noble Lord, I shall have to write to him. I suspect that we are dealing in last resorts of last resorts of last resorts.

On Question, amendment agreed to.

Clause 31, as amended, agreed to.

Clause 73 [Gas licence conditions]:

5 p.m.

Lord McIntosh of Haringey moved Amendment No. 157:

    Page 73, line 9, at end insert--

("( ) After subsection (2) there is inserted--
"(2A) Where the Authority proposes to refuse the application, it shall give to the applicant a notice--
(a) stating that it proposes to refuse the application;
(b) stating the reasons why it proposes to refuse the application; and
(c) specifying the time within which representations with respect to the proposed refusal may be made,
and shall consider any representations which are duly made and not withdrawn."").

The noble Lord said: I rise to move Amendment No. 157. I should like to speak also to Amendments Nos. 158 to 179, 288, 290, 291, 297, 298, 310, 311, 324 to 326, 330, 335, 336, 341 and 348. I acknowledge that this is a large group comprising 39 amendments, but I hope that the Committee takes comfort when I say that all of them are designed to do no more than tidy up the existing provisions of the Bill and the Gas and Electricity Acts. They stem from our desire to align the electricity and gas regulatory regimes as far as possible. This group of amendments covers a number of themes related to licences and licensing. We have organised the amendments within this group under those themes with the intention to help structure the debate. The themes are: gas licence conditions; standard conditions of licences; collective licence modifications; licence modification references to the Competition Commission; and a few minor miscellaneous amendments.

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I begin with gas licence conditions, which are dealt with in Clause 73. Two of these amendments are worth a quick mention. The remaining three, Amendments Nos. 158, 159 and 325, are minor tidying-up amendments. Amendment No. 157 provides that the authority shall give reasons to an applicant for a gas licence should it propose not to grant a licence. This brings gas into line with the provisions in Clause 29 in relation to electricity licences. Amendment No. 160 delegates to the authority the power to make regulations in relation to applications for gas licences. We have already made a similar provision for electricity in Clause 29. The Government consider it is appropriate that the authority, which will be solely responsible for granting all licences, should have the power to specify the information it requires in order properly to assess applications.

The second group is concerned with standard conditions of licences (Clauses 32 and 80). There are five amendments in this group, four of which--Amendments Nos. 161, 169, 170 and 325--are related to the same point. They provide that the standard conditions to be included in electricity or gas licences granted after the establishment of the standard conditions by the Secretary of State should incorporate any changes which have been made to the standard conditions under powers elsewhere in the Electricity and Gas Acts respectively. The remaining amendment, Amendment No. 162, merely attempts to clarify the meaning of subsection (10)(b) of the new Section 11A inserted by Clause 32.

There are five collective licence modification amendments in Clauses 34 and 81: Amendments Nos. 163, 171, 172, 173 and 298. Four are minor tidying-up amendments of no significance. Amendment No. 172 corrects a small but significant drafting error in Clause 81 which relates to the tests which the authority is to apply in order to determine whether the level of opposition to a proposed collective licence modification is sufficient to prevent it proceeding with the modification. Without this amendment, the statutory frameworks for gas and electricity collective licence modification would be markedly different one from the other. The intention is, of course, that they should be the same.

The next group, comprising 10 amendments, deals with references to the Competition Commission in Clauses 35 to 39 and 82. All of these amendments are minor or consequential. Briefly, Amendments Nos. 164 and 291 are similar in nature and extend the definition of "relevant conditions" and "relevant licence" holder used elsewhere in the Electricity Act 1989 and the Gas Act 1986 to the Competition Commission's new power to veto licence modifications in Clauses 38 and 82.

Amendments Nos. 165 and 175 serve to clarify that the Competition Commission may veto proposed electricity licence modifications which do not go far enough to remedy or prevent adverse effects identified in its report as well as those that go too far. Identical amendments, Amendments Nos. 166 and 176, clarify that where the Competition Commission exercises its veto it may in turn modify only relevant conditions of licences as defined in the Electricity Act and Gas Act

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respectively. Identical amendments, Amendments Nos. 167 and 177, clarify that where the Competition Commission has vetoed collective gas or electricity licence modifications, the holders of such licences should be notified and receive notice of the Competition Commission's own proposed modifications. Amendments Nos. 168 and 178 provide for the consequential modifications to electricity and gas licences that might be necessary following modification by the Competition Commission of the standard conditions of a type of licence.

There are 11 amendments in the miscellaneous group: Amendments Nos. 288, 290, 297, 310, 311, 326, 330, 335, 336, 241 and 348. These amendments are related to licences and licensing but do not share any common theme. They are minor and technical amendments of no real consequence. I beg to move Amendment No. 157.

On Question, amendment agreed to.

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