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Energy

Volume 130: debated on Monday 28 March 1988

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Electricity Privatisation

1.

To ask the Secretary of State for Energy when he next expects to meet the chairman of the Electricity Consumers' Council to discuss the proposed privatisation of the electricity supply industry.

4.

To ask the Secretary of State for Energy when he next expects to meet the chairman of the Electricity Consumers' Council; and what subjects he proposes to discuss.

I meet the chairman of the Electricity Consumers' Council, John Hatch, from time to time to discuss various matters relating to the privatisation of the electricity supply industry.

I thank my right hon. Friend for that answer. Has not the Electricity Consumers' Council welcomed the proposals on privatisation, particularly those protecting consumers' rights?

My hon. Friend is right. The Electricity Consumers' Council has welcomed a number of aspects of the privatisation proposals, in particular the proposal for customers' rights, which will give customers the right to compensation if the boards fail to perform to an agreed standard.

In view of the increase in electricity prices in April, will the Secretary of State bear in mind the crucial needs of the paper, chemical and metallurgical industries, which have to compete in international markets?

Yes. As my hon. Friend knows, there is a problem under our present law about making arrangements for heavy industrial users. The industry is under a statutory obligation not to show undue preference to any customer, but we recognise the need to help the heavy industrial user, and the qualifying industrial consumers schemes and other measures that have been adopted give substantial help to the heavy user.

Will the Secretary of State explain why, now that a proportion of electricity to be generated must, by law, be nuclear, thus denying market forces, he has opened up to investors from America, where they cannot get nuclear power stations built because of market forces, the right to invest in this country? What consumer right is there in that arrangement?

We have reserved to the distribution companies the obligation to buy a proportion of their electricity from non-fossil fuel supplies, but we have not specified from where. I am sure the right hon. Gentleman is referring to the proposed speech of my hon. Friend the Parliamentary Under-Secretary of State for Energy, which he will be making in about an hour's time in America. In that speech he will make it clear that he expects the overwhelming proportion of investment in the British electricity industry to be made by British companies.

Does the right hon. Gentleman realise that up to 12 power stations are now redundant in Britain? What are his plans for those redundant stations under privatisation? Does he know that some local authorities, such as the one in my area, wish to purchase and develop those redundant power stations? What is the future of such plants?

The hon. Gentleman is confirming what the Government have said: that many people, other than the CEGB, wish to be involved in the generation of electricity, and we believe that that competition will provide good hope for consumers in the future.

I notice that the hon. Gentleman is shaking his head, as if to ask me whether the redundant sites will be available for other development. That will be a matter for the CEGB, but there is much interest in buying redundant power stations and remodelling them to meet the highest standards. We hope that the private sector will come along and do some of that.

When my right hon. Friend meets the chairman of the Electricity Consumers' Council, will he also discuss with him the rates of interest charged by regional electricity boards to their customers who want to buy cookers and similar appliances? Is he aware that the Midlands electricity board charges its customers 35 per cent. interest? Is that not horrendously high, and does it not cause hardship to pensioners and others who perhaps do not read the small print? Does it not compare badly with the rates charged by banks, building societies, credit card companies and reputable stores?

I am sure that the chairman of the East Midlands board will have noted my hon. Friend's remarks. If not, I shall certainly make sure that they are brought to his attention.

When the Secretary of State meets the chairman of the board—and such a meeting is urgent—I hope that he will discuss the 15 per cent. increase that is to be imposed on prices. In the judgment of the Electricty Consumers' Council that increase is unjustified and represents a tax on the consumer. Is he aware that that view is consistent with the view of the CBI, which says that it is unsound in business terms and will cost investment in jobs? Can the Secretary of State tell the House what group, if any, agrees with this imposition of a 15 per cent. increase? Will he review his decision and recognise that in reality the price increase is an energy privatisation tax, burdening the poor for the benefit of the better off?

I have already explained to the hon. Gentleman why I think he is wrong, and I have also explained to the CBI why I think that it is wrong in the arguments that it has put forward. The price rises are totally justifiable and necessary. The hon. Gentleman was not in the Labour Government of the time, but I can tell him that, even after these increases, there will be a fall in electricty prices in real terms, whereas there was an increase of more than 30 per cent. under the Labour Government.

Ec Energy Policy

2.

To ask the Secretary of State for Energy whether he is satisfied with progress towards the development of a European Community energy policy; and if he will make a statement.

Yes, Sir. The prospects for attaining the Community's 1995 energy objectives are under review and Commission proposals on completion of the energy market by 1992 are expected shortly.

Does my hon. Friend agree that progress has been disappointly slow so far? Do the Government intend to take any initiatives to try to speed things up?

I know that my hon. Friend likes to see fast progress in Europe. Certainly the Government take the initiative to make sure that such progress is made. My hon. Friend will appreciate that the supply of energy in the member states is different and, therefore, it is not all that easy to make progress as fast as my hon. Friend would like.

Does the Minister agree that he is contradicting himself in advocating some sort of common European policy when the Government are operating market forces? How does he relate the two?

No, I do not agree, because, as I said in my original answer, we are working towards 1992, when there will be transparency pricing, which is market policy.

Will the Community energy policy be anything like the common agricultural policy? For example, will those who wish to import coal have to deposit heavy levies, or, like generating companies which wish to use coal in the Community, will they be able to buy that coal from the cheapest source at the cheapest possible price?

No, Sir. It will not be precisely the same, for the reasons that I gave in my second answer, namely, that the supply of fossil fuels in this country is different from the supply in other member states.

Is the Minister satisfied that, in discussions about European energy policy, full cognisance has been taken of the need to allocate orders, for example, to the fabrication yards connected with the development of North sea oil? Is he aware of the concern among workers at Ardersier about the need for the allocation of early opportunities to develop platforms for the North sea?

I know that the hon. Lady is most concerned about fabrication yards and, as she knows, I visited the one to which she referred. As she will have read, my right hon. Friend the Secretary of State has announced an 11th round. We continue to make progress in the North sea in exploration and development, and that is for the medium and longer-term good of those fabrication yards.

Electricity Privatisation

3.

To ask the Secretary of State for Energy what is his timetable for the privatisation of the electricity supply industry.

The Government intend to introduce legislation to privatise the electricity supply industry as early as possible. I expect that this will be in the next Session of Parliament.

Has the Minister calculated the possible number of redundancies in the British coal industry as a result of privatisation of the electricity industry owing to the import of cheap, subsidised foreign coal, or does he simply not care about those redundancies?

I have explained before to the hon. Gentleman that our proposals mean that the industry will need about 75 million tonnes of coal a year and that the Government have funded the most extensive investment programme in the coal industry of any Government. We have done that because we believe that, with modern machinery and modern working methods, the British coal industry can capture a very substantial part of those 75 million tonnes.

Will my right hon. Friend, in concert with my right hon. Friend the Secretary of State for Social Services, make it plain to pensioners and others that, despite the increase in electricity tariffs being higher than the rate of inflation, the combined effect of that and social security legislation will leave them better off?

What account is the Secretary of State taking in his privatisation planning of the fact that the CEGB has been financing the fast reactor programme to the extent of 30 per cent., and that there is great anxiety about the withdrawal of that support and whether the Government intend to continue the fast reactor programme?

I know of the hon. Gentleman's deep concern about this matter, as he and I first met and discussed it at Dounreay. No decisions have yet been taken. The CEGB has to decide whether to continue with this funding. These matters are for discussion, but I recognise that they should be resolved as soon as possible and that his constituents should be kept fully informed.

Will my right hon. Friend ensure that there are safeguards over the operation of the local distribution networks so that privatised area boards cannot exert monoply control to prevent small local generators from delivering electricity to local industrial consumers?

Yes. We are anxious that the small generators should have an opportunity to get into the system. We believe that under our proposals that will be possible, whereas under the present arrangements it has proved difficult.

At what point in the timetable does the Secretary of State expect to be able to advise the House and the country of the price at which the electricity supply industry will be sold? Would he care to suggest whether an industry with a net asset value of £55 billion will be sold for less than 40 per cent. of its worth?

I am afraid that I do not recognise the figures that the hon. Gentleman has just used. I have never heard anyone suggest that the net assets of the organisation are worth £55 billion. I am constantly being told by Labour Members that I am seeking too high a price for the industry, so it is a relief to be told now that the Government are thinking of selling it too cheaply. We intend to get a fair price for the industry, and that will become clear as time goes on.

Open And Coke Fires

5.

To ask the Secretary of State for Energy how many households are estimated to have open coal or coke fires; and if he will make a statement.

I understand from British Coal that an estimated 2·9 million households are using coal or solid smokeless fuels on open fires.

How does that figure compare with the previous known figure? Has there been a decline, or an increase? Labour Members call for cheaper fuel for poorer people, so will such people be able to burn imported cheap fuel on their open fires rather than more expensive home-produced fuel?

The available figure shows a slight decrease on the previous year, but that is hardly surprising given the mild winter.

As to my hon. Friend's second point, if British Coal produces coal competitively, more households will be likely to buy.

Is the Minister aware that many coal fires are going out because—[Laughter.] I thought that that was rather good. This is happening because smokeless zones have been introduced. Therefore, people have been left with only one fire, so they cannot properly heat their homes. Could British Coal offer grants to such people when an area is made smokeless, so that they can afford to put in central heating, or will he ask the Secretary of State for the Environment to allow local authorities to give such grants?

I am most grateful to the hon. Gentleman for the polite way in which he posed that question. There will be agreement on both sides of the House that the benefits of smokeless zones are substantial.

With regard to the hon. Gentleman's proposition, British Coal's time is already taken up in seeking to increase productivity. That is the most important aim and ambition of its production.

Does my hon. Friend agree that part of the death of coal as a heating product is due to the fact that local authorities do not build chimney breasts into houses? There has been a saving from clean-air zones, but does my hon. Friend agree that part of the price that the mining industry has had to pay is that fewer people burn coal and now use other forms of energy?

I agree with my hon. Friend that there are no doubt many reasons why households decide not to use coal and use instead oil, gas or electricity. I should have thought that the primary reason is cost. That is why it is crucial that British Coal and its labour force should seek ways to improve productivity.

Combined Heat And Power

6.

To ask the Secretary of State for Energy what further considerations the Government are giving; to the promotion of combined heat and power systems.

The Energy Efficiency Office will continue to promote combined heat and power technology. The privatisation of the electricity supply industry will open new business opportunities for all independent generators, including combined heat and power operators.

The Government appear to want to rely on the private sector for any development of combined heat and power. Does the Minister accept that if large areas, such as our cities, are to benefit from combined heat and power, substantial Government support and funding will be necessary? Does he further accept that if he introduces combined heat and power into our cities that would be a gigantic step towards the more effective use and conservation of energy for the future?

I accept that combined heat and power can be a great asset in a major city. I have seen examples of it in Sheffield and Leicester. However, I cannot agree with the hon. Lady that Government finance should be available. It is far better that market forces should prevail.

Will my hon. Friend acknowledge the contribution that combined heat and power can make in our cities, not only to the production of cheaper electricity and heating to overcome fuel poverty, but to the urban renewal programme? Will he speak to his noble Friend the Secretary of State for Trade and Industry, who is supposed to be co-ordinating the Government programme on this, and ensure that there is an input into those programmes?

I agree with my hon. Friend that the contribution that is made, particularly in the two examples that I have seen in Leicester and Sheffield, is a great and good contribution. I shall ensure that my noble Friend the Secretary of State for Trade and Industry sees those examples.

I join the Minister in looking forward to more combined heat and power generation. One of the ways in which that may take place is through the reopening of smaller coal-fired power stations. Following the Government's rejection of the EEC's offer to reduce sulphur and nitrogen emissions in the air and the resulting acid rain, it is possible that the opening of combined heat and power stations will increase sulphur emissions. How will the proposed privatisation affect that?

The hon. Gentleman knows perfectly well what the Government said about emissions. As I have already said in answer to previous questions, the potential for combined heat and power in certain major cities in this country, and perhaps elsewhere, can be great, but it will be subject to market conditions.

Central Electricity Generating Board

7.

To ask the Secretary of State for Energy when he last met the chairman of the Central Electricity Generating Board; and what subjects were discussed.

I meet the chairman of the CEGB regularly to discuss various matters relating to the privatisation of the electricity supply industry.

When the Secretary of State meets the chairman of the CEGB, does he have the same impression as many others, that the chairman has forgotten more about the electricity industry than the Minister will ever know, and does he agree, therefore, that his comments should be taken seriously? Will the Secretary of State respond to the statement by Graham Hadley, the secretary of the CEGB, supported by the chairman of the CEGB, that the separation of the grid from generation will cost the taxpayer up to £1 billion, or 10 per cent., on electricity charges, and will increase the threat of blackouts? What is in that for the consumer, and what makes the Minister think that he knows better than the CEGB?

I believe that if the hon. Gentleman cared to ring Mr. Graham Hadley he would now discover that he no longer maintains that it would cost £1 billion. Mr. Hadley's figure, which was absolutely impossible to understand, was based on the assumption that the Government would propose the creation of five vertically integrated power boards. We have not. It is agreed between the CEGB and our technical experts that although there may be a cost as a result of our proposals, it can be more than matched by the savings that will result. The hon. Gentleman's information is grossly out of date.

When my right hon. Friend next meets the chairman of the CEGB, will he explain how welcome and well-engineered the privatisation proposals are? Will he also explain how the introduction of competition will be welcome to those who supply the CEGB with equipment, as it will enable them to put more competitive designs forward, which will in turn enable them once more to export to the world?

I should be happy to put those points to Lord Marshall, and at the same time I would remind him that the Electricity Council, the 12 area boards and the Electricity Consumers' Council totally support our proposals. I draw that to the attention of the hon. Member for Motherwell, North (Dr. Reid).

Has the Secretary of State had any discussions with the chairman of the CEGB about improving the transmission system in England and Wales to make it possible for consumers in those areas to take advantage of the substantial availability of generating capacity in Scotland?

Yes, I have discussed strengthening the interconnect. It may interest the hon. Gentleman to know that there are plans to spend approximately £7 billion on strengthening the transmission system in England and Wales, including strengthening the Scottish interconnect.

Will my right hon. Friend ask Lord Marshall what he is doing to counter the recent alarmist programme on BBC "Panorama", which linked the magnetic field around high-tension cables with cancer? If my right hon. Friend disagrees with the findings of that programme, may I ask what is his Department doing to put the record straight?

I believe that the "Panorama" programme was essentially scaremongering. To date I believe that there has been one authority for this thesis, and he has said that the findings of his inquiry are suggestive rather than conclusive. The CEGB is spending £500,000 investigating that serious allegation, but it is confident that it will find that the link is extremely tenuous.

Has the Secretary of State discussed with the chairman the speech that is to be made by his Minister in Miami? Apparently the Minister is begging American capital to come to purchase the British electricity supply industry, thus removing the controls on foreign ownership. Will the Secretary of State tell us whether his promise to the House for tougher regulations to protect the consumer in a privatised electricity industry is consistent with the promise in the speech today to American capital that the regulatory controls will be less restrictive than they are in America? The increasing profits will no doubt be paid for by the consumer.

I should point out to the hon. Gentleman that my hon. Friend's speech will not be delivered for another hour. When it is, he will find that it conclusively answers the points that he has raised. My hon. Friend's speech will make it clear that in America — it would be beyond dispute if the hon. Gentleman knew anything about it — it is accepted that the regulatory system is so restrictive that it is inhibiting the development of the electricity supply industry and putting the consumers at risk. We have said — and my hon. Friend has my total support — that although we will have a tough regulatory system, we will not have one that is so tough and mindless that it puts the customers' interests at risk.

Electricity Generating Stations

8.

To ask the Secretary of State for Energy when he next plans to meet the chairman of the Central Electricity Generating Board in order to discuss the ordering programme for electricity generating stations.

It is for the CEGB to decide when to order new power stations. My hon. Friend will be aware that the CEGB has applied for consent for a nuclear plant at Hinkley Point and two coal-fired stations at Fawley and West Burton.

Does my right hon. Friend agree that, as there will be a three or four-year delay before the generating side is privatised, it is important that we keep the ordering programme for nuclear and coal-fired power stations moving, especially in the light of the early closure of the Magnox nuclear stations?

I believe that it is important that we maintain a steady flow of orders for the electricity supply industry, because we have not had an order for a power station now for eight years and the supply industry has had tremendous problems. As a result of our proposals more people will come forward with proposals to build power stations. That should result in an acceleration rather than a slowing down of orders for the industry.

Does the Secretary of State accept that we found his answer to a previous question in relation to the strengthening of the transmission links between England and Scotland very interesting? Has he discussed the purchase of power from Scottish power stations with the chairman of British Coal so that we may receive a statement and some clarification about the future of coal-fired power stations in Scotland? There is a great deal of uncertainty over their future as a result of the attitude taken by the South of Scotland Electricity Board.

As the hon. Gentleman is aware, negotiations between British Coal and the SSEB are under way at the moment. I have made it clear that I want to see those negotiations succeed. I would like to see Scottish pits kept open and Scottish electricity derived from Scottish coal. There is no doubt about where I and my right hon. and learned Friend the Secretary of State for Scotland stand on this matter. With regard to the interconnect, I believe that England offers a good export market for Scottish electricity. I hope that the SSEB will take advantage of its opportunities south of the border.

Does my right hon. Friend agree that the timing of the power stations depends very much on the planning process? Has he noticed that Liberal-controlled Somerset county council has allocated £500,000 to tight the planning aspects and the whole concept of nuclear power on the Hinkley C site? As the rates have been increased by 12 per cent. to fund that, does my right hon. Friend agree that the ratepayers are having to pay for the anti-nuclear prejudices of the Somerset branch of the Social Liberal Democratic Alliance?

It is perfectly proper for the Somerset council to express its views and to ensure that its point of view is put over. We do not want to inhibit that. However, I hope that the council will concentrate on doing that rather than on making party political points about the nuclear power industry. In so far as the council is spending that money to promote political arguments rather than planning arguments, that must be deplored.

British Coal

10.

To ask the Secretary of State for Energy when he last met the chairman of British Coal; and what matters were discussed.

11.

To ask the Secretary of State for Energy when he next intends to meet the chairman of British Coal to discuss the future of the industry in the light of his proposals to privatise the electricity industry.

I meet the chairman of the British Coal Corporation regularly to discuss all aspects of the industry.

Has the Secretary of State discussed with the chairman of British Coal the plight of Leicestershire's highly skilled coal miners, whose pits are being closed one by one? Is he aware that the opening of the pit at Asfordby is not enough to provide jobs, particularly on the basis on which they are to be allocated? Is he aware that more mines should be opened in the Vale of Belvoir to provide low-cost coal and jobs and because the skilled and excellent band of miners led by Jack Jones deserve the Government's support? They are not getting nearly enough of that support.

I remind the hon. and learned Gentleman that the Government have invested more in the coal industry than any predecessor Government. We have invested a total of nearly £9 billion since 1979. As he points out, substantial investment is being made in Asfordby. In contrast to the position when the Labour party was in office, miners now have a very generous redundancy scheme and no miner has been made compulsorily redundant. They can have either a generous redundancy scheme or another job. That is the case in Leicestershire.

In the Secretary of State's discussions with the chairman of British Coal, has he talked about the future of coal imports into the United Kingdom and the possible effect that the exchange rate might have upon the cost of these imports? Has he expressed a view to him about whether the exchange rate policy should be that of the Chancellor of the Exchequer, or that of the Prime Minister?

I congratulate the hon. Gentleman on his ingenuity, but I hope that he will not object if I concentrate on the energy part of his supplementary question. I have discussed with the chairman of the CEGB the amount of coal-fired capacity that he has. If British Coal continues to improve its productivity, and if miners adopt modern methods to accompany the modern machinery that has been installed, I believe that British Coal can have a bright future as a supplier of choice to the electricity supply industry.

When my right hon. Friend next meets the chairman of British Coal, will he draw to his attention the views expressed to me by some of my constituents that British Coal applies double standards when offering redundancy?

A number of my constituents have been refused redundancy this month, while a gentleman in Yorkshire, who is alleged to have created 51 wildcat stoppages and cost the board £14 million., has been given generous redundancy. Is there no loyalty today?

If my hon. Friend writes to me about these specific matters, I shall take them up with the chairman of British Coal.

Does my right hon. Friend think that sometimes those who purport to represent the coal industry expend rather too much energy on trying to protect their jobs regardless of the cost, when they should be seeking ways of keeping customers happy? Does he agree that that is the best way to secure real jobs?

I am sure that my hon. Friend is right in saying that the best guarantee of maintaining jobs in the industry is by concentrating on ensuring that coal is supplied to the Coal Board's customers at competitive prices.

Is the Secretary of State aware that 1,094 men left the coal industry in south Wales on Friday, and that 694 of them are in my constituency? These are men who opted for redundancy. Only 130 decided to stay in the industry. This is because the majority no longer have any faith in the promises made by those who run the industry.

Will the Secretary of State pay tribute to those who have worked for so long in the industry and who, through no fault of their own, are now out of a job? Is the right hon. Gentleman aware that the redundancies have pushed male unemployment in my constituency to 34 per cent., which is unacceptable? Will he make additional moneys available to British Coal Enterprise Ltd?

We are examining the performance of British Coal Enterprise Ltd., and funds are being made available to it on a continuing basis. We deplore pit closures, but very often pits close for good reasons. Pits become worked out, as it were, and geological faults occur. The hon. Lady has confirmed that anyone who works in the industry has the choice of staying in the industry or taking extremely generous redundancy terms.

Electricity Privatisation

12.

To ask the Secretary of State for Energy what representations he has received from alternative energy interests about the White Paper on electricity privatisation.

Our proposal for a specified minimum proportion of non-fossil-fuelled generating capacity has been well received by those involved in the development of alternative energy sources. We hope that this will encourage new ideas in generation.

May I congratulate my hon. Friend on his commitment to non-fossil fuels, which is in accordance with the White Paper? What role does he see for renewable energy sources following privatisation?

There could be a good possibility that there will be a role for them. My hon. Friend will appreciate that that will be subject to further research and development taking place so that renewable energy sources can become competitive. The research and development programme is proceeding. This was demonstrated by an announcement by the CEGB and another by my hon. Friend the Parliamentary Under-Secretary of State last week.

13.

To ask the Secretary of State for Energy if, pursuant to his statement to the House on 7 March, Official Report, column 53, he will place in the Library the technical and scientific evidence upon which he based his conclusion that the grid control will have the same ability to deal with emergencies in electricity supply under the proposed privatisation as it does under the present arrangements.

No, Sir. This is an operational matter. The full range of powers to deal with emergencies will be available to those controlling the national grid under the proposed arrangements, as under the present ones. This will be built into the contract arrangements and the operating agreements.

Is the Secretary of State aware that a number of his hon. Friends, as well as a number of mine, went to CEGB Southwark, where we heard at length from Mr. Edgar McCarthy, the controller, about the Sundon incident 20 May 1986, when, if, within two minutes, post-fault urgent action had not been taken by those who had complete command of the grid London and the home counties would have been absolutely blacked out by system voltage collapse? Can the right hon. Gentleman assure Mr. McCarthy and others, on technical grounds, that their fears are groundless?

Yes. There will be no change in either the assets or the operation of the grid. What will change will be the ownership of the generating stations. The only basis for the assertion made to the hon. Gentleman is that under private ownership generating plants will not respond to orders from the national grid. As I have explained to him, it will be built into their contracts that in an emergency the national grid will have the right to override any other agreements. Therefore, the same assets will be available to the grid controllers, who will be able to give the same instructions in an emergency as in 1986.