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Supply Of Gas At An Annual Rate In Excess Of 25,000 Therms To Be Subject To Special Agreement Of British Gas Corporation

Volume 984: debated on Wednesday 14 May 1980

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Amendment made: in page 1, line 9, at end insert:

"(1A) Section 25(5) of that Act shall not apply in relation to tariffs fixed by the Corporation under subsection (3) of that section with respect to the prices to be charged for therms supplied to any premises in excess of 25,000 therms in any such period of twelve months; and nothing in section 24(1) of that Act shall be construed as affecting the power of the Corporation to fix such tariffs as they think fit with respect to the prices to be charged for therms so supplied."—[Mr. David Howell.]

I beg to move, in page 1, line 17, at end insert:

" (3) An existing consumer who in the period of 12 months immediately preceding the pass- ing of this Act has been provided under tariff with a minimum supply of gas to any premises in excess of 25,000 therms shall have the right to require the corporation to enter into a special agreement with him. The terms specified in the agreement shall ensure continuity of supply of an annual volume not less than that supplied in the previous 12 months immediately preceding the passing of the Act and at a price to be agreed. In the case of a dispute as to any of the terms of such agreements an appeal shall lie to the Secretary of State."
I listened with interest to the hon. Member for Bassetlaw (Mr. Ashton) talking about the flexibility of arrangements for nationalised corporations. I pay tribute to the Government, because their amendments help towards achieving my objective. I am concerned about consumers and how they fare. The number of consumers likely to be affected by the Bill is no fewer than 11,000 and the amount of gas involved is about 6 billion therms.

The hon. Member for Bassetlaw discussed people who are not affected by the Bill. The British Ceramic Manufacturers' Federation states in a letter:
" Whilst the strict objective of the alteration to the Bill does not affect any of our members as far as we can ascertain … all their consumptions are in excess of 100,000 therms ".
The firms involved consume between 25,000 therms and 100,000 therms. The British Gas Corporation is obliged to supply existing users and new users within 25 yards of a gas distribution pipeline. That is provided for in schedule 4 of the Gas Act 1972,. Under section 13 of the Energy Act 1976 it must provide a volume of gas but it is not obliged to exceed 25,000 therms per year. That has the effect of giving priority to small industry and commercial consumers as opposed to industry generally.

The corporation supplies gas at published tariffs up to an annual consumption of 100,000 therms per annum. Higher levels are supplied on the basis of special contract terms related to the market.

Section 25(3) of the Gas Act 1972 provides:
" the prices to be charged by the Corporation for the supply of gas… shall be in accordance with tariffs … and those tariffs … shall be so framed as to show the methods by which and the principles on which the charges are to be made as well as the prices which are to be charged, and shall be published."
This Bill, unfortunately, goes along a different tack and provides that supplies of gas in excess of 25,000 therms per annum—that is, anything between 25,000 and 100,000 therms—shall cease to be on tariff but shall be under contractual terms, that is, contractual terms with the monopoly seller, the British Gas Corporation.

My anxiety here is that there are certain disadvantages in oil-related contracts. The Minister has said that more consumers will move off tariffs and on to contract terms. These, of course, can be made subject to a minimum and a maximum take. Penalties can be imposed for exceeding the upper limit. There is no comparability with payments by other customers. There is therefore a lack of transparency in these contracts, because they are not published. The terms are therefore not at published rates. Furthermore, they are not tariffs, but I want to ask the Minister what contractual terms are likely to apply.

I admit that at present new contracts are few and far between, but the rates prevailing are anything in excess of 35p and 41 p per therm. The latter figure is very high indeed. Are they to be moved from very attractive, or reasonably attractive, conditions to very much higher rates, which will be imposed by the corpora- tion? Should not we say that we will do something for their protection?

My hon. Friend has indicated that he would like to know whether customers will be on firm contracts or interruptable contracts. The latter are very much cheaper and are related to the price of fuel oil, but firm and renewable contracts will be related to gas oil. I am not against the point in principle. I think that this is right, but here we find that a right is conceded by at least 11,000 customers. They get no compensation for their loss. There is no quid pro quo. This will help the corporation, but it will not necessarily help them, because they will be on higher contractual rates.

I seek a number of guarantees from the Minister, some of which he has already conceded. Customers should have continuity of supply at the rate of the previous 12 months in excess of 25,000 therms per annum. Secondly, the price should be agreed inter se with an appeal lying to the Secretary of State in the event of there being any dispute.

I stress the importance of an appeal, because I can tell the Minister that in Committee on the Continental Shelf Bill in 1964 I moved an amendment to clause 9 that a reasonable price should be given to the companies supplying gas to the BGC. If there had been a reasonable price and it had been agreed by arbitration, all the difficulties that have supervened would never have arisen.

That is the analogy that I am using on this occasion, and all that I am suggesting to the Minister is that if there could be an appeal to the Secretary of State anyone who loses his rights and receives no compensation will have an opportunity to go to the Secretary of State to ensure that he gets justice.

I can put this in two final points. What I want to do, and what the amendment seeks to do, is to protect the consumer against the abuse of the exercise of monopoly power by the corporation. I should have thought that those ideas would commend themselves to the Minister. Perhaps he will be able to give us further clarification on what is likely to occur.

I rise briefly to support my hon. Friend the Member for Bedford (Mr. Skeet). We are proposing to take away a statutory right that was granted by the House to certain industrial gas consumers. It is right that we should seek to safeguard and protect those industrial consumers who have come to rely upon the right given to them by the House. It is in that spirit that I seek some clarification from my hon. Friend the Minister about whether the customers affected will be granted a right to firm supply contracts, and some indication of the price that they will be offered.

My hon. Friend the Member for Bedford (Mr. Skeet) acknowledged that our amendment has gone a long way towards meeting what he had in mind. As my right hon. Friend the Secretary of State said, we have received an assurance that the BGC does not intend to cut off or to reduce supplies to industrial customers. Obviously, I cannot say what the contractual terms will be, because they are negotiable. My right hon. Friend said that customers would be in a position broadly similar to that of new customers—it would be on that sort of basis.

Our amendment—which has already been accepted by the Committee— ensures that the legislative provisions that prohibit discrimination between tariffs should not apply over 25,000 therms. The precise purpose of that is to enable the BGC to have a standby tariff which would be available to the pre-1976 customers using more than 25,000 therms. They will have a standby tariff where agreements may not have been fully reached on the terms of a contract. The tariffs will be published. They will be submitted to the consumer councils in the normal way. That is the mitigating factor. The difference between our amendment and that of my hon. Friend the Member for Bedford is that he wants a final court of appeal to rest with the Secretary of State, whereas we have said that there should be standby tariffs for special circumstances where an agreement may not have been reached.

I am grateful for the opportunity to say a few additional words on the matter. I had hoped that the Minister would concede a little further and say that he would not be against an appeal to the Secretary of State, who is the fount of all wisdom on energy matters. He would be able to arbitrate quite impartially on the matter.

Obviously, the Minister will not be moved in the direction that I had hoped. However, he has conceded a lot of ground and. on that basis, I beg to ask leave to withdraw the amendment

Amendment, by leave, withdrawn.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.