Select Committee on Delegated Powers and Deregulation Twenty-Fourth Report


ANNEX 3

Letter to the Chairman from Mr K Howells MP, Parliamentary Under Secretary of State for Consumers and Corporate Affairs

UTILITIES BILL

UTILITIES BILL: REPORT STAGE: DELEGATED POWERS

Further to the memoranda submitted to the Committee on 4 May and 5 June, and subsequently cleared, I am writing to advise you of changes to the Utilities Bill at Report stage in the House of Lords, one effected by a Government amendment and two others by non-Government amendments which the Government proposes to accept. These three amendments entail the introduction of further delegated powers.

ENERGY EFFICIENCY TARGETS: NEW CLAUSE BEFORE CLAUSE 103 (GOVERNMENT AMENDMENT)

A Government amendment will be tabled inserting a new clause into the Bill before clause 103. The clause is intended to enable the Secretary of State to set a global energy efficiency target. It provides an order-making power for the Secretary of State to set one global energy efficiency target that applies in setting the separate energy efficiency obligations for gas and electricity under clauses 70 and 99 of the Bill. Delegated powers are required because, as with clauses 70 and 99, it is not appropriate to set a complicated obligation in primary legislation which may need to be varied in future to address changed circumstances.

FINANCIAL PENALTIES: CLAUSES 59 AND 95 (NON-GOVERNMENT AMENDMENT)

Clauses 59 and 95 of the Utilities Bill relate to the imposition of financial penalties for contraventions of licence conditions, individual standards of performance and other statutory obligations.

Under the Bill as currently drafted, there is no specific upper limit on penalties, although they are limited to that which is reasonable in all the circumstances of the case. However, the Government has come under pressure on the lack of a cap on penalties. This contrasts with financial penalties imposed under the Competition Act 1998, which are limited to 10% of the UK turnover of the licence holder concerned.

In Committee on 21 June, Lord McIntosh, responding to a backbench amendment, agreed to consider the issue of a cap before Report stage.

Following that consideration, the Government has decided that it would be appropriate to amend to the Bill so as to limit financial penalties to 10% of the turnover of the licence holder on whom the penalty is imposed, with detailed provisions to be set out in an order made by the Secretary of State. This will bring the provisions of the Utilities Bill into line with those in the Competition Act 1998 in this respect.

Appropriately worded amendments have been tabled for Report by Lord Borrie and Lord Currie of Marylebone. These amendments are likely to have the support of peers on all sides of the House and the Government intends to accept them.

I attach a memorandum setting out further details.

3 July 2000

Supplementary memorandum by the Department of Trade and Industry

Introduction

This memorandum supplements the memoranda on the Utilities Bill reported on by the Committee on 25 May and 8 June 2000. It explains the proposed use by the Secretary of State of certain delegated powers contained in further Government amendments to the Bill, to be considered by the House of Lords at Report Stage.

PARTS IV AND V

AMENDMENT OF THE ELECTRICITY ACT 1989 AND THE GAS ACT 1986

CLAUSES 59 AND 95

Clause 59 new subsection (6A) inserts a limit on financial penalties, imposed under new section 27A of the Electricity Act 1989, of 10% of the turnover of the licence holder, determined in accordance with provisions specified in an order made by the Secretary of State.

Clause 59 new subsection (6B) provides that such an order shall be made by affirmative resolution.

Clauses 95 new subsections (6A) and (6B) have equivalent effect in relation to new s30A of the Gas Act 1986.

Purpose: The Bill proposes powers to impose financial penalties for contraventions of licence conditions, standards of performance, and other statutory obligations. Under the Bill as currently drafted, there is no specific limit on penalties, although there is a requirement that they must be reasonable in all the circumstances of the case. The Government intends, however, to accept backbench amendments to limit financial penalties imposed pursuant to s27A of the Electricity Act 1989, or s30A of the Gas Act 1986, to 10% of the turnover of the licence holder on whom the penalty is imposed. The detailed provisions - such as definition of turnover - are, under the amendments, to be determined by the Secretary of State by order.

Reasons for proposing delegated powers: The detailed provisions, such as those relating to the definition of turnover, may need to change over time and would also entail a level of detail that would be inappropriate on the face of the Bill.

Procedure: Affirmative resolution, mirroring the procedure adopted for the analogous provisions under the Competition Act 1998 and offering equal opportunity for Parliamentary scrutiny.

PART VI

MISCELLANEOUS AND SUPPLEMENTARY

NEW CLAUSE BEFORE CLAUSE 103

Subsection (1) provides an order-making power for the Secretary of State to set one global energy efficiency target that applies in setting the separate energy efficiency obligations for gas and electricity under clauses 70 and 99 of the Bill. Subsection (2) allows him to tell the Authority how to apportion the overall target between gas and electricity licensees to whom orders under clauses 70 and 99 apply. Subsection (3) requires the Authority to exercise its functions under clauses 70 and 99 as best calculated to achieve the overall target. Subsection (4) contains provisions for consultation.

Purpose: to allow the Secretary of State to set a global energy efficiency target.

Reasons for proposing delegated powers: As with clauses 70 and 99, it is not appropriate to set a complicated obligation in primary legislation which may need to be varied in future to address changed circumstances.

Procedure: Affirmative resolution, consistent with the procedures under clauses 70 and 99.

June 2000


 
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