Examination of Witnesses (Questions 340-353)|
21 OCTOBER 2003
Q340 Lord Bradshaw:
Without there being a regional or national team?
Mr Miller: Yes, they would. They
would work within the electricity or the water sector. If it required
more extensive resources outside those sectors then we could call
on military aid for instance, we could call on the informal arrangements
with local authorities and putative category 1 responders, but
it is at that stage that those informal arrangements start becoming
less reliable, whereas the mutual aid arrangements within the
sectors we are fairly confident of and understand the resources
available to us.
Q341 Lord Bradshaw:
Is there anything you would like to add to that?
Mr Turner: Yes. I agree that the
procedures we have today would work within the current rules and
requirements. What is being proposed in the Civil Contingencies
Bill is to standardise and get some consistency across the UK.
I was asked how BT would meet those requirements and assist across
the UK without incurring huge amounts of cost. A national forum
for emergency planning would allow us to liaise with one body,
to agree policy and standards so that companies such as BT, which
covers the whole of the UK, do not have to do it in nine or ten
separate forums against different standards.
Q342 Lord Bradshaw:
Which is your preferred option, to do it in nine or ten separate
silos or to have what is bound to be more costly regional and
Mr Turner: I would prefer to discuss
policy and standards setting, to get generic plans set up certainly
for the telecoms aspect in one national forum. You need to discuss
specifics for the regions at the local level.
Q343 Lord Bradshaw:
And tactically at the local level.
Mr Turner: Yes.
Q344 Kali Montford:
Mr Miller, you have just made some very interesting observations
about the mutual arrangements that are required in the case of
an emergency, but in a recent answer to a Select Committee another
utility company said that if we started looking at compensation
in emergency arrangements those mutual agreements may break down
because of commercial considerations. How much do you think we
ought to be thinking about that in considering this Bill?
Mr Miller: I would use the example
of the water sector. There is a requirement on water utilities
to prepare for their worst case scenario and to have adequate
resources to deal with that worst case scenario. There is a debate
going on between the sector and Defra at the moment over the extent
to which our worst case assumptions remain appropriate post 9/11.
So we are geared up for a single incident within our own area
or even multiple incidents, but if you extended that multiple
incidents scenario, when does it become unreasonable to be prepared
and to rely entirely on your own resources rather than on mutual
aid? The responsibility in terms of compensation for an organisation
remains with that organisation, so it will have a risk appetite
and it will resource itself appropriate to its risk appetite as
a commercial business. If there were accountabilities in compensation
terms for failure to meet expectations and standards they could
not be exported through the mutual aid arrangement.
Q345 Kali Montford:
So are you telling me not to bother?
Mr Miller: If you were another
organisation that we were attempting unsuccessfully to resource
the mutual aid from we would not expect to come back to you with
a compensation bill.
Q346 Mr Jones: Gentlemen,
I would like to ask about financial issues. First of all, could
you tell us how much your organisations spend on contingency planning?
Do you actually agree with the regulatory impact assessment which
says that the proposals in the Bill achieve the Government's policy
objectives without imposing significant burdens on your sector?
If you do not agree with that, how much would it cost to implement
what is laid out in Part 1 of the Bill?
Mr Miller: We spend of the order
of £200,000 per year on operational staff directly associated
with emergency planning within north-west England. The plant maintenance
costs associated with emergency planning are of the order of £150,000
per year. There is a distributed resource amongst the 4,000 staff
who contribute to emergency planning, maintaining contingency
plans and the like, that would be of the order of an additional
£200,000 per year. We do not fundamentally disagree with
the impact assessment although we believe it is slightly weighted
on the low side. So it is not an order of magnitude wrong but
it is perhaps two or three times too small in our view. In terms
of reasonable take up of duties under the Bill providing category
1 responders do not go to extremes and the water and utilities
sector does not represent an undue proportion of high risks in
their portfolio of risks, then it might be reasonable to expect
our costs to increase by of the order of 25 per cent, but we do
not see a doubling or a trebling of those costs. If the risk appetite
and the desire to be seen to be compliant with the legislation
really took off then I would say all bets are off in terms of
Mr West: Within Western Power
contingency planning is part of our legal obligations and is in
our distribution licence conditions, so there is a whole raft
of activity there in terms of resilience planning, IT, architecture
and so forth which is included anyway. Excluding all of that,
we have spent £250,000 in the last year on contingency planning.
The level of expenditure may vary between different distribution
companies. For example, a wholly urban distribution company might
face little risk from high winds but might face an enhanced terrorist
risk. Alluding to a point from the last question in terms of cost,
there are mutual aid arrangements in place between the electricity
companies in the UK. The electricity regulator, Ofgem, has in
place a set of information and incentives project standards governing
the performance of distribution company networks and if they fail
to meet those standards they are penalised by up to two per cent
of their income. If you are calling for aid under the mutual aid
arrangements then there are arrangements in place whereby those
penalties can be put on hold by Ofgem. However, there are no arrangements
in place to deal with the situation where someone is providing
aid and that is something we are discussing with the regulator
as it is a disincentive at the moment.
Q347 Mr Jones: Mr
Miller, what control do you think there is going to be over the
excesses you mentioned and what part do you think you should play
in curbing some people's excesses?
Mr Miller: To be frank, I see
very little to curb those excesses at the moment. Inevitably there
will be a range of perspectives on risk exposure within the category
1 responders and that will be influenced by people who have got
considerable experience in the field. The threat of a utility
presenting a high impact risk to a county can be quite significant,
but the likelihood of that occurring as opposed to an air crash
or a train crash is considerably lower. We would hope that experience,
judgment and common sense is brought to bear, but if somebody
got the bit between their teeth and decided to exploit the duties
of a local authority in demanding information and a response from
us and that became seen as good practice then it would be increasingly
difficult to meet those demands.
Q348 Mr Jones: Does
it not concern you that common sense cannot really be written
into this Bill? I am sure we will come across "jobworths",
whether it be civil servants or regional civil servants or council
officials who will put a long list of demands on you. Should there
not be something in here to curb those demands or some sort of
arbitration between those people who are asking for these demands
Mr Miller: There is one defence
that I would bring to bear in a minute, but I would not demur
from a proposal to bring additional control and reinforcement
of common sense to bear. Within the water and electricity sectors
the nature of the contract with our regulator is such that, providing
it passes triviality and materiality tests, we can recover an
appropriate level of cost consistent with an equitable balance
of risk between the customer and the shareholder. If additional
costs were incurred then we might expect to see a proportion of
that cost recovered through our charging formula, but there is
no guarantee of that and it would be in part down to the regulator.
Chairman: I will have to stop you there because
there is a division in the House of Lords.
The Committee suspended from 5.16pm to
5.30pm for a division in the House of Lords
Q349 Chairman: Is
there anything you wanted to say in response to that question
or were we just about finished?
Mr Miller: No.
Chairman: That is fine. Lord Archer, you are
Q350 Lord Archer of Sandwell:
I wonder whether you could assist us a little further following
on from the answers you gave a few moments ago. I think my question
is directed principally to Mr Turner because in the BT paper,
in answer to question 8, there is a clear suggestion that the
Treasury ought to fund any costs which arise from the Bill. If
we turn to Part 1, clause 2 of the Bill and you see the duties
imposed on a schedule 1 component, they seem to be, as I think
Mr West said a few moments ago, things you would do normally in
the course of your operation, that is from time to time assess
the risk of an emergency occurring, assess the risk of an emergency,
making it necessary for the person to perform any of his functions.
If you look all the way down that list, all of them seem to be
things which would be incidental to what you do in any case. There
may be those who would ask why should the Treasury fund operations
which are incidental to what you do anyway.
Mr Turner: First of all, BT does
not believe there should be a statutory duty on Government to
cover all of the costs of category 1 and 2 responders for costs
incurred before, during and post emergencies, just some of them.
The costs to be recovered would be incurred as a result of activities
beyond individual operational and business as usual costs. If
you look at the duties of category 1 responders in the Bill and
you then say what is the knock on impact of that to category 2
responders, at the moment BT can service the category 1 responders
in their interpretation across the country of the implementation
of current duties and I think currently we interface with about
250 separate organisations across the country and you might say
how can you possibly do that. The way we do that is that the draw
on our time is actually disproportionate, so some authorities
might have two emergency planning officials, another may have
a part of a person who is doing it. A lot of it depends on where
they are physically, do some have major tunnels in their area,
do some have ferry ports, it depends on the authority. However,
if the interpretation of the Bill is such that that then puts
a requirement on everyone nationally to implement certain standards
then the implication certainly on ourselves to support that level
of activity is far greater than we do currently. At the moment
we can support London and the London Resilience Team by putting
it as a top priority within my unit, so we have not increased
the head count, we have just put it as a high priority, but if
I had to do that nationally that would give me an issue to resolve
in terms of resourcing and it would also add cost to BT from a
manpower perspective. The other issue would be that as the Bill
goes live we could have a lot of regional authorities having to
step up and do more than they did before at the same time. So
it is not just a matter of supporting meetings, there is a lot
of detailed work to be worked through with a fire brigade or an
ambulance service in a region. Just to name one category 1 responder,
say an ambulance authority wants us to work with them to look
at the resilience and the fall back arrangements for their key
sites, be it hospitals, ambulance stations or whatever, that is
a phenomenal amount of detailed work which is different to BT
planning resilience and contingency planning for its own key sites
and exchanges. If you had asked me which key service is served
by building X I could tell you quite readily, but if you were
to ask me if I knew the resilience of supply to this authority
or this key person, that is a different level of detail. It also
means BT is not necessarily the owner of that customer. You then
get down to the details of how is the supply chain managed, ie
a key authority may buy its retail service off another service
provider who may then subcontract the whole of that service back
onto BT or onto another telecom supplier. You are actually moving
down to a greater level of detail and it depends how that is managed
and rolled out across the country. So BT is not saying the Government
should cover it all, we are saying there is a health warning here
as to how much is wanted to be done, in how much detail and what
timescales as to what load you could put onto us.
Q351 Lord Archer of Sandwell:
If you were claiming recompense, would you as a matter of accountancy
be able to identify the costs which were due to the requirements
Mr Turner: Yes, we would because
it would be incremental to what we do now.
Q352 Chairman: Have
you anything to add?
Mr West: On the same issue from
the electricity side, within the list in clause 2 there is an
item called "prevention of emergency". That is fine
providing that the requirements there are no different from those
already set in regulatory requirements. If local authorities believe
more is required then obviously that is something we would have
to discuss with our regulator.
Q353 Baroness Ramsay of Cartvale:
I wondered if you could give us some indication of the kind of
business continuity and emergency plans you have in place. I am
sure you are all speaking for companies that do have them, but
what would your reaction be to the idea that utility organisations
should have a statutory duty to devise a business continuity and
Mr Miller: The water sector does
have that statutory duty already under the Security and Emergency
Measures Direction. It is difficult to conceive how a utility
organisation could behave in a business like and professional
manner and inspire investors' confidence without the demonstrable
existence of those plans. If we take our organisation as an example,
we have a pyramid of plans, a single crisis management plan at
the apex, five operational emergency plans to deal with major
incidents in each of our Group businesses and then at the lowest
level we have over 2,000 continuity plans for our water assets.
That is fairly typical of a large utility.
Mr West: Within electricity there
is already a legal requirement under section 96 of the Electricity
Act as amended and the DTI within the last year have undertaken
two very major studies into the contingency planning of the electricity
companies. The first was announced by the Energy Minister on 11
February last year and reported some three months later. The study
covered the quality of emergency plans, the factors affecting
confidence in plan execution and so forth. There was a further
detailed study announced by the Energy Minister on 29 October
into the October storms and that reported in December. In the
press release the minister said that he wanted the system gearedI
take it he meant the system of regulationto incentivising
the sort of investment which provided the bench mark performance
and failure to invest being punished rather than rewarded, which
gives the impression that he saw that within the regulatory environment.
Mr Turner: From the BT perspective,
I agree with my colleagues that it is essential to have business
continuity plans. The only question I would then ask is up to
what point do you have business continuity plans, so continuity
in what circumstances, in what circumstances does it become economical,
where the cost exceeds the risks, but BT have got detailed continuity
plans which go from sustaining its cash flow down to a major mobile
exchange capability to restore a smoking hole scenario.
Chairman: Thank you very much for that. I think
time has defeated us. We must not keep our other witnesses waiting
any longer. We would be grateful if we could have written responses
to the last three questions. Thank you.