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Lord Tombs: I support the amendment. It would be a pity if we gave the impression that it involves a political issue; it does not really. I am sure that there is strong political feeling in Scotland but there are rational arguments that must be heard. The noble Lord, Lord Gray, has illustrated the increased burdens that will accrue to Scottish generators, which are out of all proportion with reason. My appeal is for the new authority to recognise that there are real differences in Scotland from England and Wales—differences of geography and organisation. Those differences of organisation have existed for almost 50 years and have produced many improvements in the industry during that period.

The figures cited by the noble Lord, Lord Gray, speak for themselves. Under the current proposals, which are the NGC/Ofgem discussion proposals, the burden on generators in Scotland would be totally disproportionate to their comparatively small contribution. It is impossible to defend them rationally. On that ground, I support the amendment.

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Baroness Carnegy of Lour: The noble Lord, Lord Tombs, is right to point out that this is not only a political matter, although whether it will become one when it reaches another place is a different matter. If the Minister takes my noble friend Lord Gray's advice and considers the constituencies that will be affected, he will see what my noble friend means. I have.

Historically, there were very good reasons why the privatisation was carried out differently—but that led to a strange effect when a common system began to be worked out. Distortions have produced the effect enunciated by my noble friend. As I understand it, discussions continue—nothing has yet been settled—but if the result is as it appears it will be at present, that will be devastating. It is important that the Bill should preclude that happening now so that nothing quite so unfair can occur.

I think my noble friend forgot to say that the amendment puts a cap on the price a generator would have to pay to get access to the grid, which is being extended into Scotland—either an upper price, a lower price or both. That would at least be a safety measure, a fall-back provision for five years. That is what my noble friend is trying to do; it is a safety measure.

It is terribly important that generation in Scotland should not be hugely damaged. We have great deal of generation in Scotland. It is spread out: the nuclear stations are in remote places, as we would want them to be. In future, when we have to build more nuclear stations, as we inevitably will, Scotland is obviously one place where they ought to be, so that they can be a long way from centres of population.

The reason why negotiation is under way is that, in theory, it would be cheaper to have all generation close to centres of population, because transmission costs would be much lower. But it is not really on to move Peterhead power station to the south-west of England. In future, with terrorism, unknown weather and other problems, it will be important to have generation spread all over the country. This is not a Scottish nationalist—with a small "n"—issue at all, it is just pointing out to the Government that there is a danger that, because of history and the motivation to attract generation nearer to centres of population, something odd may happen that would be a disaster for the whole country, not just Scotland.

The cap is a good idea that should be included in the Bill for five years. Then everyone would be confident that there would be a level playing field for everyone entering the new system. I strongly support the amendments.

4.45 p.m.

Lord Gray of Contin: If I may speak again, the gremlins have returned my piece of paper, and it would be better if I finished what I had to say now, before the Minister replies. I especially thank my noble friend Lady Carnegy, for what she said. She said it so well that I need not say much about Amendment No. 115A, which concerns the power to modify the licence conditions.

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I shall speak briefly to Amendment No. 114ZA, which provides the power to set up the lower limit or the higher limit, as the case may be, for the transmission licence. Its purpose is to ensure that the position of electricity generation in Scotland, including the new renewable energy schemes, is not discriminated against. Failure to tackle discrimination against Scottish generators, which is reflected in the current proposals, would inevitably have serious consequences for everyone in Scotland. The current proposals for electricity transmission pricing could have a damaging impact on the economies of strategically vital power stations in Scotland, and therefore place a question mark over the security of electricity supply. People in Scotland will be rightly concerned about that.

In conclusion, I thank the noble Lord, Lord Tombs, for his contribution. My noble friend Lord Jenkin of Roding once said that the noble Lord, Lord Tombs, had forgotten more about the electricity industry than the rest of us will ever know. I therefore find it reassuring that he supports my amendments, for which I thank him.

Baroness Miller of Chilthorne Domer: Has the Scottish Executive made any representations on this issue to the Government? If so, what were they?

Lord Davies of Oldham: I acknowledge the concern that surrounds what the transmission charges might be for generators under BETTA. Nothing could be further from my mind than to group together the three contributions from Scottish sources and suggest that there is some kind of Scottish Mafia at work. I cannot think of a collective term that I would find more odious. Clearly, it was a representation that the interests of Scotland need to be safeguarded in relation to this issue.

Having spent several weeks during which all members of my party have been berated for the degree of Scottish influence in the Commons, it is a little rich to suggest that I might be neglectful of such interests and not recognise that they exist. I notice that on the Front Benches represented here today there are no Scots, but I recognise that on the Government Front Bench Scottish interests are well represented. I am grateful to the noble Lord, Lord Gray, for reminding me of the Scottish dimension. I was aware of it. I hear what he has to say about it but I believe that he will be persuaded by the arguments that I am about to address to him. In the same way, if I succeed in persuading him, he will shortly indicate that he accepts the arguments.

In terms of the likely costs for Scotland, I understand that the noble Lord has identified a number of figures that would chill the soul of all those who are not familiar with them. The figures represent the current negotiating position. The noble Lord will recognise that we have a considerable way to go. Obviously, we are involved in the development of a Bill and a structure which we hope will obtain over many years in the development of the transmission of electricity in this country. But the figures relate to the current and first proposals and I have no doubt that there will be great toing and froing over the figures.

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I am therefore not in a position to suggest that there is an underlying Government imprint that this is the situation which will obtain when negotiations have finalised—far from it. I recognise the dramatic quality of some of the noble Lord's figures but I am not sure that they portray the totality of the truth. I recognise that the figures are accurate but they will be under constant and ever-present negotiation over the next few months.

The figures need to be put into context. As the noble Lord recognises, the general evaluation of the implications of BETTA is that it will bring benefits to all consumers, including, of course, Scottish consumers. The development of the new situation is broadly neutral. The Scottish figures will not go up in quite the way identified by the noble Lord, not least because other charges for Scottish generation will disappear under the new arrangements—for example, the interconnector from Scotland to England.

There are factors which reduce costs for Scotland. I recognise that I am speaking against a background where there is scope for change, but our analysis of the present figures is that the net effect on Scotland will turn out to be broadly neutral. The noble Lord did not mention in his contribution that some of the economies to be effected in Scotland will help to balance certain aspects of the figures proposed.

The noble Lord is right, as is the noble Duke, the Duke of Montrose. We are under an obligation to ensure that the charges imposed are cost reflective. They are also supposed to be non-discriminatory and to promote competition in generation and supply. We are concerned that the methodology should meet those conditions. We want transmission assets to be built and charged for in the most efficient way. I heard what the noble Lord said about one particular generating station and I recognise the force with which he presented the argument.

But the noble Lord will recognise that, under the charging methodology identified in the legislation, under the present arrangements and as BETTA comes into operation, it will be necessary to ensure adequate supplies of electricity at reasonable prices. I am not in a position to make as detailed an analysis as the noble Lord with regard to one particular generator in Scotland, but I emphasise that there are pros and cons of the new regime and its impact on Scotland .

It will be Ofgem's role to assess the charging methodology that the GB system operator develops against the conditions set out in the licence. We do not think it appropriate to set limits in legislation on the regulator powers by prescribing an upper or lower limit. The regulator will be in operation over a considerable period of time. By definition, building in limits would impose restrictions that were time constrained. In legislation that would not make a great deal of sense.

I understand that the noble Lord has appropriately used the opportunity with these amendments to articulate concerns about the situation as it affects Scotland. I maintain that we need to resist

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Amendment Nos. 114ZA and 115A simply in terms of ensuring that we do not put limitations on the regulator's powers.

As is my wont, I should like to be a little more constructive in certain areas. There is one clear exception; namely, Amendment No. 113ZL, to which the noble Lord spoke with considerable passion. When the Government consider that wider energy objectives may be prejudiced, we want to see activity by Ofgem. But while Ofgem plays a part in delivering the objectives, as recognised by the breadth of its statutory duties and decisions about trade-offs between environmental and economic objectives—I am sure that the noble Lord is with me on this—the broader issues of meeting objectives within this policy are matters not for Ofgem but for the Government and for Parliament. It is there that the broad objectives and principles of the policies need to be discussed, debated and agreed.

As part of the consultation on transmission charges issued in August, the Government raised the question of whether special dispensation was needed for renewable generators in peripheral areas with high renewable potential which would otherwise be affected by the highest transmission charges, in order that the Government's renewable targets are met. We are prepared to look at discretion being exercised in this respect.

We are not in the position to have the agreed solution on this yet. But we are working towards the objective that there needs to be an exception for this group of renewables. It is for that reason that we are agreeing to consider the principle of taking a power to give renewables in specified areas some dispensation to protect them from the high transmission charges, which was the burden of some representation. On Report, we hope to give effect to that in amendments to the Bill.

Our broad strategy is not to be discriminatory in those terms, but to ensure that the policy is broad and fair to all. I recognise that the noble Lord will disagree with my analysis of the current cost position because he has given voice to some significant figures. Perhaps I may give some figures that may be helpful. We are in Committee, so I take it that his figures are in the form of challenging probes. I hope that I can give a response that will advance the debate, so that on Report we will all be better informed.

I have a detailed breakdown that indicates that the use of the system will see an increased cost of 90 million. Connection charges will go down by 25 million. The interconnector charges will go down by 60 million. I have a note here which says, "other". I think that the noble Lord would probably interpret "other" as I shall: if I add another 5 million, I get a total of 90 million going down, to balance the 90 million that is going up. The noble Lord is a tolerant man. I am sure that he will give me a little grace with regard to the 5 million.

I am seeking to emphasise that these figures underpin my earlier proposition, that the overall costs with regard to Scottish electricity are broadly neutral.

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The noble Lord does not need to emphasise the dragons that wait upon any unfavourable treatment with regard to Scotland; I know that they breathe fire on every occasion that they need to. I assure the noble Lord that we would not be constructing this Bill, nor would we be working on the basis of the charges emerging, if the outcome was the one that he described in such graphic terms, and which I recognise would be somewhat provocative to my various good friends north of the Border in the other place.

I hope that I have reassured Members of the Committee that the amendment tabled by the noble Lord, Lord Gray, would oblige us to interfere on the basis of legislation in a way that would not be appropriate. It relates to a system of charges which, by definition, are time limited. I should like the amendments to be withdrawn on the understanding that as regards Amendment No. 113ZL, we certainly shall be considering the proposition about renewables. In all the other circumstances, I reassure the noble Lord that the question of fairness in the market with regard to Scotland is more balanced than his figures identified.

The noble Duke, the Duke of Montrose, asked me a particular question about the transmission system. The transmission system is charged for by charging generators and demand; that is, suppliers. But generators do not pay demand charges as well. I think that in his contribution he was asking me specifically on that, whether there was a danger of an additional charge in those terms, which is not the case.

I must confess that I have entirely forgotten the question that the noble Baroness, Lady Miller of Chilthorne Domer, asked me. I do apologise.

5 p.m.

Baroness Miller of Chilthorne Domer: I asked whether the Scottish Executive had made any representations to the Government and, if so, what they were.


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