---

Energy Bill

I add my gratitude to the noble Lord, Lord Redesdale, who said to me a few days ago that this amendment expressed our common desire rather more clearly than the original. The way in which the noble Lord, Lord Oxburgh, spoke to it clearly indicates that. If I had been moving it, I would have gone through the same historical story as the noble Lord did. I was going to use the simile of a Christmas tree. It started off with a clear, bright fairy at the top, namely to promote competition, and over the years, in a series of different and often disjointed legislation, all sorts of baubles have been added on the way down. Like the noble Lord, Lord Oxburgh, I say that this is no criticism whatever of Ofgem’s work in this field; but it is in danger of breaking down. Part of the purpose of the amendment is, as the noble Lord said, to stop the Christmas tree collapsing under its own overdecorated weight. It has become opaque, which is not Ofgem’s fault but it is because of the rather disjointed way in which our piecemeal process of law-making has taken place. There is also a policy justification, which is that Ofgem’s existing remit, complicated as it is, with all the baubles that have been added to the Christmas tree, does not remain properly focused to deliver the policy outcomes that we now require. The key output from energy regulation must in future be the development of a secure and sustainable system of energy supply for the UK. Therefore, the overriding statutory objective of Ofgem must incorporate not simply the narrow consumer interest in a high-quality service at a reasonable cost, but the broader requirements on behalf of the whole of society of a fully secure and sustainable industry that is able to deliver gas and electricity supplies securely in the longer term. I agree with the noble Lord, Lord Oxburgh, that an opportunity was missed not to have this as part of the Bill. It is now so widely recognised that one would have thought that the Government might have been wise to have taken it. However, the amendment has been tabled, and similar amendments were debated in another place. We are trying to bring the remit into line with the overall objectives that the Community now has for the supply of energy. Almost every other clause is designed in one way or another to facilitate and support long-term investment in the wide range of energy infrastructure. We all know that there has got to be over the next 20 to 25 years a huge amount of investment, both in generation and in transmission, but they have got to deliver the national policy goals of combating climate change by reducing CO2 emissions, while also ensuring security of supply. I suggest that, against that backdrop, simply focusing on the narrow consumer interest is not going to produce the result that we want for the wider societal interest. No doubt the Minister will explain the Government’s view, but as I understand it, they believe that best way of ensuring that regulation is carried out with a view to delivering these longer term energy policy objectives is for them to provide more detailed guidance—explicit statutory guidance—on social and environmental issues. As I suggested briefly at Second Reading, that is a very indirect way of proceeding, which would probably be ineffective given the unprecedented challenges that the industries face over the next 20 years. So the amendment to which the noble Lord, Lord Oxburgh, has spoken and to which I put my name, starts from the premise that the priority of maintaining supply security on a fully sustainable basis requires an urgent recasting of Ofgem's objectives. The noble Lord was quite right to say that this is a process of evolution. We need to evolve the narrow concern for consumer protection into a broader concept that will encompass the collective interest of the whole community in the maintenance of securing sustainable energy supplies. Such an approach is more consistent with the almost incalculable social value of energy in today's world. It would also sit more comfortably with the emerging direction of European policy and perhaps eventually global policy. Of course, energy regulation is complex and difficult. It may not always be possible through legislation to resolve the tensions between market mechanisms, security of supply and the delivery of social and environmental goals, but that is what this amendment would achieve. I have it from Ofgem that it accepts entirely that the question of setting statutory duties is a matter for Parliament. The note from Ofgem states: "““We recognise this is an important issue given the challenges ahead, including tackling climate change, securing Britain’s energy supplies and protecting consumers at a time of rising prices””." Ofgem recognises all those objectives, but they are not included in its existing statutory remit. The amendment would be a much better way of achieving this and it is one to which I attach a great deal of importance. The time has come to change things. Only the other day I was reading an interesting collection of essays entitled The World Crisis. The Way Forward After Iraq, which included pieces by Jimmy Carter, Henry Kissinger, George Schultz, my noble friend Lord Howell, and my noble and learned friend, Lord Howe of Aberavon, and others. I was interested to see that one of them was by someone of whom I am afraid that I have never heard—the honourable Branko Terzic, who is Global Regulatory Policy Leader for Energy and Resources for a firm of consultants, chairman of the United Nations ECE Ad Hoc Group of Experts on Cleaner Electricity Production from Coal and other Fossil Fuels, and a former director of the US grid. Mr Terzic is obviously extremely knowledgeable in this area and I would like to read the summary of his paper. He states: "““The twentieth century demonstrated that markets in energy can work, that private capital is available and that progressive regulation based on correct national policies is a precondition to success in providing adequate energy at reasonable prices. The ""new potential for climate change catastrophe recognized in the twenty-first century adds an additional reason to support programmes and policies that support and enable efficiency in energy conversion, transmission and consumption. While no silver bullet exists to address the multiple issues of balancing supply and demand and mitigating greenhouse gas emissions, there is a combination of policies that can do the job or buy society time until better solutions come along. Prior experience demonstrates that progressive public policies which engage market forces, treat private capital fairly and provide incentives to efficiency all along the energy conversion and usage path can supply a set of solutions to the energy and climate change dilemma of the twenty-first century””." That is exactly what this amendment seeks to achieve and I give it my warmest support.