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Energy Bill

moved Amendment No. 32A: 32A: After Clause 91, insert the following new Clause— ““Energy public interest considerations (1) After subsection (2C) of section 58 of the Enterprise Act 2002 (considerations specified as public interest considerations for the purpose of the main merger regime) insert— ““(2D) The following are specified in this section— (a) the need, in relation to energy supplies, for there to be a plurality of persons with control of the energy enterprises providing those supplies; (b) the need for security of energy supply.”” (2) After section 58A of that Act insert— ““58B Construction of consideration specified in section 58(2D) (1) For the purposes of section 58 and this section, an enterprise is an energy enterprise if it is involved in the production or supply of electricity or gas. (2) For the purposes of section 58, where two or more energy enterprises— (a) would fall to be treated as under common ownership or common control for the purposes of section 26, or (b) are otherwise in the same ownership or under the same control, they shall be treated as all under the control of only one person. (3) The power under subsection (3) of section 58 to modify that section includes power to modify this section.”””” The noble Lord said: My Lords, listening to that marvellous debate on the previous group of amendments, I was reminded that a number of years ago I spoke at a dinner immediately after Sir Peter Ustinov. It was a mixed blessing because as much as I enjoyed his speech, with every gale of laughter I knew that I was dead in the water. I had exactly the same feeling this evening. I first moved a version of Amendment No. 32A as long ago as five months on the notion of a public interest test to be applied to mergers, acquisitions and takeovers in the energy sector. I was pretty easily swatted away by the Front Bench with references to light-touch regulation and the sanctity of the marketplace. I doubt whether we will hear much about light-touch regulation this evening, but it is possible. In Committee on 1 July, I raised the issue again, and said briefly that many countries are, "““moving towards a point where they can look through deals and ownerships to see the real owners and the real purpose behind deals. We have been laggards on this””." I went on to say: "““The world is changing rapidly, and it is time for us to look more closely at whether we are semi-consciously drifting into the type of economy that the United States became in the late 19th and early 20th century, from which it eventually had to jolt itself””.—[Official Report, 1/7/08; col. GC 58.]" I could not have imagined how rapid that jolt would be and how prescient I might have been. I still believe that there is an issue. If we believe that the Government are right—and I do—to move quickly with the banking bail-out, I do not think anyone in your Lordships’ House would argue that should an energy company fail, any responsible Government would move equally quickly to bail that energy company out. That is all the more reason why the rights and interests of citizens and consumers should be protected when such an energy company makes its original purchase. Why are my fears not entirely fanciful? Let me offer two possible examples—one from the water sector and one from infrastructure. On 26 September 2000, RWE, according to the Independent newspaper, swallowed Thames whole. It paid £4.3 billion for the privilege and took on £3.5 billion in debt. Over the next six years, it drew out the maximum dividends that it could and made the minimum investment in the infrastructure, until it sold the business for £8 billion six years after buying it. The newspaper reported: "““A Thames spokesman said the refinancing was simply designed to replace debt guaranteed by RWE with debt issued against Thames as a free-standing company””." What does that mean? It means that a price tag that became £8 billion had been pinned to a business by RWE compared with the £4.3 billion it had paid originally, but that a bond had been used to take on the cost of the original loan. I am not an accountant— there is an eminent one opposite who can probably add a lot to this. Six years after being purchased, the Daily Telegraph reported: "““Thames Water is planning to shed 1,200 jobs, or 20 per cent of the workforce, as … its … parent company which also controls National Power, pushes ahead with plans to sell the business””." The most important thing at the time was that the analysts felt that British management had been put under more pressure from Germany to slash costs to improve the balance sheet. That business could not be held to have been bought, run and sold in the interests of the taxpayers of this country. Another example, one over which I agonise every week as I fly into Heathrow, is the purchase by Ferrovial of BAA. I do not think that anyone could claim that such a heavily leveraged purchase allowed Ferrovial to put anything like the capital investment into our infrastructure that we desperately needed to have access to the rest of the world, and indeed for the rest of the world to reach us. These are not small issues, and it was for those reasons that I raised them in the first place. We are also moving into a very different regulatory environment, and it will be interesting to hear from the noble Lord, Lord Mogg. In an interview with the Guardian last week about his new job at the FSA, the noble Lord, Lord Turner, warned that a new cadre of higher-paid regulators would ask tougher questions about the health of financial institutions in the wake of the credit crisis. He also said: "““There will be more people asking more questions and getting more information than we were getting before. There is no doubt that the touch will be heavier. We have to make sure it is intelligent and focused on where the risks really are””." The purpose of my amendment, which I shall not press—as the Government know—is to ensure that the noble Lord, Lord Mogg, his successors and the team that surrounds them have the powers to push before the curve. The noble Lord, Lord Jenkin, interestingly and accurately said that the key is regulators having the power to act ahead of the curve, not behind it. They should not have to clear up the mess that has been made, but should be able to ask the right questions and be tough enough before the event so that we do not end up with limp and lame companies that we as taxpayers have to bail out. That is the purpose of my amendment. I have no intention of pressing it. I have had a lot of very good discussions with the Front Bench and with the Bill team. I think that we have begun to get somewhere, and I hope that my noble friend will confirm that. I think that it is somewhere important. I picked up something in the New York Times last Sunday that I had forgotten. It was a quote from The Great Gatsby in which Nick Carraway assesses the brutal world of Tom and Daisy Buchanan. He says, "““They smashed up things and creatures and then retreated back into their money or their vast carelessness … and let other people clean up the mess they made””." I do not want to live in a country where the regulator spends his life only clearing up the mess that others have made. I want the regulator to have the powers to ensure that the mess cannot be made in the first place. I beg to move.