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Energy White Paper

Volume 401: debated on Thursday 20 March 2003

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10.

What discussions she has had with Ofgem about the Energy White Paper. [103889]

Ministers and officials have held a number of discussions with Ofgem about the energy White Paper, both before and after its publication. The White Paper includes a number of commitments relating to Ofgem, which we are pursuing with the regulator.

Is my right hon. Friend aware of comments by the head of Ofgem that the Government's environmental and social guidance to Ofgem is not yet strong enough? In the light of those comments, will she undertake to revisit the guidance, and will she consider further whether Ofgem requires additional sustainable energy expertise on its board of directors?

I entirely agree that the environmental guidance needs to be strengthened in the light of our White Paper objectives and commitments. We have that work in hand. We have also, as we state in the White Paper, agreed with Ofgem that it will produce regulatory impact assessments, including environmental impact assessments, on all new policies. I am delighted to say that a new non-executive board member with strong environmental credentials has been selected, and we will make an announcement about that shortly.

In a written answer, the Energy Minister stated that increasing the renewables obligation from 10 per cent. to 20 per cent. will add £1 billion to the annual cost of electricity generation. On the assumption of a 3p buyer price, does the right hon. Lady believe that she will achieve 20 per cent., and if not, what price does she envisage, and what effect will that new price have on the cost of electricity to consumers?

As I think the hon. Gentleman knows, we have published on the DTI website the extensive economic modelling work that underpins the analysis and the conclusions of the White Paper. As I said earlier to the House, the renewables obligation by 2010 will deliver a £1 billion boost to investment in the renewables sector. Energy prices at present, with the sole exception of industrial gas, are lower than they have been for about 20 years. A striking aspect of the consultation that we did with the public was that cheap electricity was seen as rather less important than meeting our carbon obligations. I therefore believe that we will be right to continue with the renewables obligation in order to ensure that we meet not only the 2010 targets but our 2020 objectives as well.

Has my right hon. Friend taken into consideration the views of the regulator about what will happen when we become a net importer of gas, and the fact that we could become more reliant on gas over the next 10 years? As has been proved in relation to oil in the last few weeks, an unstable situation in regard to gas supply could have a traumatic effect on domestic and industrial energy supplies if we do not take action now. Will my right hon. Friend tell us which way she intends to go on the issue of the net import of gas?

The issue that my hon. Friend has raised is one of the reasons why we need a new energy policy. Over the next five years or so, we will indeed become a net importer of oil and gas. We already import about half the coal that we use. This will change the energy position in the United Kingdom. We will have to pay even greater attention to possible threats to the security of supply that could result from international events. Let me stress, however, that we have been importing oil from Russia for the last 37 years or so without any interruption, and that much of our gas supply will come from Norway, a close colleague and partner. We are already putting in place a new treaty with Norway to ensure that we will be able to secure those supplies.