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Noble Lords: Yes.

Baroness Miller of Hendon: Well, my Lords, it is really bad news if, at the end of the day, I make a mistake like that. Perhaps I should not have brought it to the Minister's attention. I shall not read that page again, unless the Minister would like me to, but I think I ended up by saying what I meant to end up by saying, which is that perhaps the remit of the regulator should now be considered. Much as we want electricity costs to be as low as possible, we definitely want continuity of electricity in the generating industry. I apologise again to the Minister for my eagerness to finish my response to the Statement.

3.44 p.m.

Lord Ezra: My Lords, I, too, thank the Minister for repeating this important and in many ways disturbing Statement. I accept that in view of the importance and size of British Energy, which supplies more than 20 per cent of the electricity needs of the country, in these difficult circumstances there either had to be a restructuring or the Government had to take over responsibility for running the assets and continuing to supply electricity from them. Those were the two options described in the Statement.

However, I should like to ask the Minister a number of questions. First, it was implied in the first part of the Statement that British Energy should have taken action earlier and that, had it done so, the solution could have been less costly. Is that the Government's view, as is implied in the Statement? Apart from that, the major external factor—to which the noble Baroness, Lady Miller, referred—has undoubtedly been the massive fall in wholesale electricity prices, which has affected not only British Energy but other major generating companies. Incidentally, that big reduction in wholesale electricity prices has only in part been passed on to the retail sector.

The reason for the fall in those prices has undoubtedly been the operation of the new electricity trading arrangements, NETA. Does the Minister agree that, as the noble Baroness pointed out, it is time to review the operation of NETA, which seems to have introduced a degree of instability in the marketplace? The question of security of supply is obviously closely tied to that question. Earlier this week, I asked the Question to which the noble Baroness referred and received a reassurance from the noble Lord, Lord Sainsbury, that electricity reserves were adequate. I beg to differ; they are probably inadequate to meet exceptional circumstances. But whatever may

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be the case, should we not review the regulatory arrangements to ensure that a reserve capacity is maintained?

Under the previous, much criticised Pool arrangements, there was such a provision. There is no longer. The Government have said that they will keep the electricity supply situation under review, but what will they do if the review shows that a shortage is likely to develop? From where will they get the reserve capacity, if it has not been previously built up and maintained?

Apart from the question of reserve capacity, to which nuclear and other generators must contribute, there is the big issue of the future of the nuclear industry itself. We hope that that will be clarified in the forthcoming energy review. Does the Minister agree that it is vital that a decision should then be reached on the future of the nuclear industry? Either we continue with a nuclear industry of the size that we have now—in which case all the problems of the cost of construction, decommissioning and dealing with waste and security issues must be identified and resolved—or, if that is not to be done, we must be clear what other forms of energy are to be developed that will have a similar impact on the environment.

So the issue does not simply affect a single electricity generating company. It raises wide questions of energy policy, security of supply and, above all, the future of the nuclear industry itself.

3.49 p.m.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Baroness, Lady Miller, and the noble Lord, Lord Ezra, for their reception of the Statement. I say straightaway to the noble Baroness, Lady Miller, that I was not at all worried by the reversal of the order. I listened to Mr Tim Yeo's intervention in the Commons. I took careful notes. I noted the seven points that he made. The fact that the noble Baroness took one of them out of order does not worry me in the least. At least they were the same points, which is helpful. A co-ordinated Opposition! I am glad to hear it. Unfortunately, it does not sound as though the noble Baroness, Lady Miller, paid attention to the very effective answers which the Secretary of State gave to Mr Tim Yeo. The arguments that were used do not carry much weight.

The noble Baroness asked about the climate change levy. She said in effect that we should be moving over to a carbon tax or to trading permits. The climate change levy and the alternatives of carbon tax and energy trading permits will, of course, be considered in the White Paper that will be published in the new year. However, the Secretary of State made it clear that this is not a carbon tax. It is intended as an energy efficiency incentive for the whole energy industry and all its customers. The noble Baroness and Mr Yeo can hardly expect us to make a change for just one company.

The noble Baroness repeated the allegation that there had been a deal between British Energy and BNFL that had been blocked by the Treasury. That is

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not the case. It is a commercial deal between the two companies in which the Government were not involved. She repeated the question about the role of the obligations in yesterday's announcement of the Pre-Budget Report and the borrowing requirement despite the fact that the Secretary of State answered clearly that those obligations could be and would be maintained within the departmental expenditure limit of the Department of Trade and Industry and would, therefore, have no effect on the figures in the Pre-Budget Report.

Security of supply is a legitimate concern. The noble Baroness, Lady Miller of Hendon, and the noble Lord, Lord Ezra, asked me about it. I shall give the facts of the matter. The capacity of the generating industry is 65 gigawatts. The peak demand in the winter of 2000–01 was 55 gigawatts, which leaves a margin of 17.5 per cent. That is just about the same margin as there has been for many years. It has been lower in one or two years and more like 20 per cent for most years. Now, as opposed to the position in the past, there are seven gigawatts of capacity in power stations that are mothballed and could be brought back into operation. We are always concerned about security of supply, and we never relax that concern. However, the arrangements and the capacity that we have and can bring into use are adequate for the purpose.

The noble Baroness repeated the allegation that the climate change levy was generated by the Treasury's need for revenue. The climate change levy is revenue neutral. She asked for an assurance that we would not let British Energy go into administration. That is a matter for the company; it has an obligation to reform its managerial activities and persuade its bondholders, stakeholders and shareholders that it is in their interest not to go into administration. If it fails to do that, there is a threat of administration, and the Statement made that clear.

I was surprised by some of the comments about the new electricity trading arrangement. I had thought that it was a success for the Government and a success for the Utilities Bill that I was proud to take through the House a couple of years ago with the help of the noble Baroness, Lady Miller of Hendon, and the noble Lord, Lord Ezra. It was a success that retail prices were brought down by the new electricity trading arrangement. That was what we tried to do. The old pool arrangements were absurd. They were contradictory and led to excessive profits for some of the energy companies. That is not to say that we do not keep NETA under review. We support changes that will reduce barriers to consolidation and the balancing mechanism. Again, such matters can be considered when we produce our White Paper in the new year.

The noble Lord, Lord Ezra, raised a particular point about whether British Energy should have taken action earlier. He heard the criticism in the Statement of some of the actions of British Energy earlier this year. They are matters for the management of the company, not the Government, but the Secretary of State made the Government's views sufficiently clear. I have answered the noble Lord's questions about the fall in prices due to NETA and about the review of

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NETA. His broader question about the future of nuclear energy is, of course, a matter for the White Paper to be published in the new year.

3.55 p.m.

Lord Howie of Troon: My Lords, I heard the Statement with great interest. As my noble friend knows, I have been an advocate of nuclear energy for a long time—since my early life as a civil engineer, when I used to design nuclear power stations.

I shall pick up a point raised by my noble neighbour—although she sits on the other side of the House—Lady Miller of Hendon relating to the climate change levy. No doubt, the climate levy had positive features, but my noble friend must know that the form of energy that has least impact on the climate is nuclear energy. The imposition of the climate levy on nuclear energy is, therefore, not only mistaken but daft. I have been in this House for 25 years or so and in another place for longer, and I am used to seeing governments do things that are unnecessary and daft. It is the way of things. However, to impose the levy, which deals with climate change, on an industry that does not change the climate is dafter than daft.

I do not blame my noble friend. He is one of my oldest friends in politics. However, he should suggest to those who are in authority that they should pull themselves together and have a good look at the matter. If they will not listen to what I have said on the matter, they should, at least, listen to what the noble Baroness, Lady Miller of Hendon, has said.


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