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Energy Bill

My Lords, it is a great pleasure to respond to my noble friend. He and I were introduced into your Lordships’ House almost 11 years ago to the day. We have always had a fellowship of spirit. I have learnt that my noble friend is very persistent. He has made this point in a number of Bills and has proved to be pretty successful. Although he will not press the point today, I assure noble Lords that I am listening carefully. It is essential that we have robust powers at our disposal to intervene in energy sector mergers on competition grounds or when we have genuine concerns about security of energy supply. In the past two weeks, in addition to our debates today, two Oral Questions have focused on the security of supply and the proposed takeover by EDF of British Energy, which have brought to the fore some of the issues to which my noble friend referred, and which, I suspect, the noble Lord will soon return us to. There is no question that our energy market is changing. There are greater levels of foreign investment; we are becoming more reliant on important energy; and we have all been feeling the effect of global energy prices. Many of those factors have benefits for our energy market, particularly in terms of foreign investment, but we have to face up to other serious issues to ensure that we have a long-term, sustainable energy policy and security of supply. I can offer my noble friend reassurance that the Enterprise Act enables the Government to intervene in any merger where such intervention can be demonstrated to be a proportionate and necessary measure to protect a legitimate public interest. Three public interests have now been specified in UK law as legitimate considerations. The first is national security, which incorporates the concept of public security provided for in European law. The second is ensuring plurality, quality and standards in the media, and recently we added the stability of the UK financial system. Energy and energy security are, of course, matters of legitimate public interest and are directly relevant to national security. I understand that there is widespread support for this view among other European states and case law supports this view. Our understanding is that under the existing public interest consideration of national security, if the Secretary of State had any security of supply concerns related to an energy merger, he could intervene. Having examined the matter carefully, we do not believe it is necessary to introduce a further public interest consideration relating specifically to energy. Some perverse incentives might come about if we were to specify energy in the way the amendment suggests. I return to the debate we had last week in Oral Questions because we strongly support the liberalisation of Europe’s energy markets and firm action by the European Commission to tackle protectionist behaviour by member states. I think we have the support of the whole House in pursuing that. For the UK to propose identifying the energy sector as a special case when considering mergers might be taken to indicate a shift away from the firmly held position of the UK. There is also the point, which is often made by Ministers when lists are proposed for specification in a Bill, that if we specify in legislation particular sectors that may be deemed to raise issues affecting the public interest, it can create uncertainty about what may be considered to fall within the concept of national security and potentially reduce our scope to apply it in mergers in sectors not listed. On the second element of my noble friend’s amendment and the desire to ensure plurality of ownership, we believe that there are sufficient existing provisions designed to prevent excessive concentration of ownership. In response to my noble friend’s third point, I know from the discussions that he has had with my officials that one of his major aims is to increase transparency and accountability in the intervention process. I am pleased to confirm to the House and my noble friend that in response to these discussions the Office of Fair Trading has agreed to amend its guidance to make it explicit that in the event of an energy merger it would consult Ofgem and that Ofgem’s response would then be sent to the Secretary of State in full and made public. I hope that in the context of this debate and my noble friend’s amendment I have assured him that his proposal is already covered and that the OFT’s amendment of its guidance will add to the transparency that he seeks. My noble friend said that he will not press his amendment, but I hope that he will consider that the Government have responded in a sympathetic but proportionate way to the issues he raised.