Energy Bill [Lords]

House of Commons, 13 July 2004.

Alex Salmond (Scottish National Party, Banff and Buchan)

On a point of order, Mr. Deputy Speaker. We are about to begin consideration of the Energy Bill, the timetable for which was agreed at an earlier stage. Additional information has come to light since the Committee stage that influences several amendments that Mr. Speaker, with his normal great wisdom, has selected under the heading "Distribution costs and transmission charges." The amendments address future electricity generation in Scotland and the future of the Government's renewable targets, so they are of vital concern. Is there anything that we can do to guarantee that those vital amendments will not be talked out due to the timetable that was produced at an earlier stage of the Bill, given their huge importance to Scotland?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

The hon. Gentleman will appreciate that the Chair has no control over the length of time for which hon. Members speak, and is bound by the Programme Order that the House has already agreed.

New Clause 4 — Microgeneration

Stephen Timms (Labour, East Ham)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss the following: New clause 2—Annual report on energy efficiency—

'The Secretary of State shall publish in such form as he sees fit an annual report setting out what steps he has taken and proposes to take to secure carbon savings from domestic energy efficiency of 5MtC per annum by 2010 and a further 4MtC per annum by 2020.'.

New clause 3—Duties relating to energy efficiency and carbon savings—

'(1) It shall be the duty of the Secretary of State to—

(a) promote energy efficiency generally; and

(b) in particular, implement energy efficiency measures that will—

(i) assist with the achievement of carbon savings from domestic energy efficiency by 2010 over and above the 4.2MtC savings specified in the Energy Efficiency Implementation Plan; and

(ii) achieve carbon savings of 5MtC by 2010 from energy efficiency in the domestic sector.

(2) Action taken pursuant to this section shall be commenced as soon as is reasonably practicable.

(3) In this section, the "Energy Efficiency Implementation Plan" is the document entitled "Energy Efficiency The Government's Plan for Action" published by the Department for Environment, Food and Rural Affairs in April 2004 (Cm 6168).'.

New clause 6—Amendment of Sustainable Energy Act 2003—

'(1) After section 2 of the Sustainable Energy Act 2003 there is inserted—

"2A Energy Efficiency of Residential Accommodation: UK Policy Goal

(1) For the purposes of this section the 'UK policy goal' is the amount of carbon savings from energy efficiency of residential accommodation specified by this section.

(2) Subject to subsection (5) below the UK policy goal for energy efficiency of residential accommodation shall be the achievement of 5MtC savings by 2010 and a further 4MtC savings by 2020.

(3) The energy efficiency aim set pursuant to section 2 of this Act shall be the achievement of such percentage of carbon savings of the UK policy goal that in the opinion of the Secretary of State ought to be delivered by measures relating to England.

(4) Where an aim has been set pursuant to section 2 of this Act that does not reflect the percentage of the UK policy goal to be delivered by measures relating to England, then within six months that aim shall be changed in order to reflect that percentage and the Secretary of State must take reasonable steps to achieve that changed aim.

(5) The Secretary of State may at any time designate an increase in the UK policy goal and any such designation must be published in such manner as the Secretary of State deems appropriate and in such case any aim set pursuant to section 2 of this Act shall be reviewed and if necessary amended to reflect the percentage of the new goal that in the opinion of the Secretary of State ought to be delivered by measures relating to England.

(6) The Secretary of State shall report annually to Parliament on steps that he has taken and proposes to take to assist with the achievement of the UK policy goal.

(7) In this section 'residential accommodation' has the meaning given by section 2(9) above."

(2) After section 9(3) of the Sustainable Energy Act 2003 there is inserted—

"(3A) Section 2A(1), (2), (5), (6) and (7) extends to England, Wales, Scotland and Northern Ireland.

(3B) Section 2A(3) and (4) extends to England only.".'.

New clause 19—Renewable heat obligation—

'(1) For the purpose of encouraging the generation of renewable heat in order to reduce carbon dioxide emissions, provide employment in UK agriculture and improve energy security, the Secretary of State may, by order impose on each supplier of fossil heating fuels falling within a specified description (a "designated heating fuel supplier") an obligation to do what is set out in subsection (3).

(2) The descriptions of heat supplier upon which an order may impose the renewable heat obligation are those supplying fossil heating fuels—

(a) in Great Britain;

(b) in England and Wales; or

(c) in Scotland,

excluding such categories of supplier (if any) as are specified.

(3) Subject to the provisions of this section the renewable heat obligation is that the designated heating fuel supplier must, before a specified day (or before each of several specified days, or before a specified day in each year), produce to the Authority evidence of a specified kind showing—

(a) that it has supplied to customers in Great Britain during a specified period such amount of heat generated by using renewable heat sources as is specified in relation to such a supplier; or

(b) that another heating fuel supplier has done so (or that two or more others have done so); or

(c) that, between them, they have done so.

(4) If the order applies only to fossil heating fuels suppliers in part of Great Britain, it may specify that the only heat supplied which counts towards discharging the renewable heat obligation is heat supplied to customers in that part of Great Britain.

(5) Evidence of the supply of renewable heat may not be produced more than once in relation to the same heat.

(6) In the case of heat generated partly by renewable sources and partly by fossil fuel, only the proportion attributable to the renewable sources can count towards discharging the renewable heat obligation.

(7) Before making an order, the Secretary of State must consult—

(a) the Authority;

(b) the Council;

(c) the fossil heating fuels suppliers to whom the proposed order would apply;

(d) the generators of heat from renewable sources; and

(e) such other persons, if any, as he considers appropriate.

(8) In this section—

"fossil heating fuels" means coal, substances produced directly or indirectly from coal, lignite, natural gas, crude liquid petroleum, or petroleum products sold for the purposes of generating heat energy;

"natural gas" and "petroleum products" have the same meanings as in the Energy Act 1976;

"renewable heat sources" means metered sources of heat energy other than fossil fuel or nuclear fuel, but includes biodegradable waste;

"specified" means specified in the order.

(9) An order under this section shall not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, each House of Parliament.

(10) The order may provide for the Authority to issue from time to time, in accordance with such criteria (if any) as are specified in the order, a certificate to the operator of a renewable heat installation or to a renewable heat supplier.

(11) A certificate is to certify—

(a) that the operator of a renewable heat installation or in the case of a renewable heat supplier, a renewable heat installation specified in the certificate, has generated from renewable sources the amount of heat stated in the certificate; and

(b) that it has been supplied to customers in Great Britain (or the part of Great Britain stated in the certificate).

(12) If a heat supplier produces a certificate to the Authority, it is to count for the purposes of subsection (3) as sufficient evidence of the facts certified.

(13) The order may provide that instead of producing evidence under subsection (3), an electricity supplier may discharge (in whole or in part) its renewable obligation (or its obligation in relation to a particular period) by making a payment to the Authority.

(14) The order may make provision—

(a) as to the sum which for the purposes of subsection (12) is to correspond to the supply of a given amount of heat;

(b) for different such sums in relation to different periods;

(c) for different such sums in relation to heat generated in different ways specified in the order and

(d) for any such sum to be adjusted from time to time for inflation by a method specified in the order (which may refer to a specified scale or index or to other specified data of any description, including such a scale or index or such data in a form not current when the order was made, but in a subsequent form attributable to revision or any other cause and taking effect afterwards).

(15) The Authority must pay the amounts received to renewable heat suppliers in accordance with a system of allocation specified in the order.

(16) The system of allocation specified in the order may provide for payments to specified categories of renewable heat supplier only.'.

New clause 20—Electricity to be exempted when determining electricity supplied—

'In section 32A of the 1989 Act, after subsection (1)(h), insert—

"(i) that electricity generated by a generating station producing a heating or cooling effect in association with electricity shall not count towards the amount of electricity supplied by an electricity supplier that is subject to the obligation.".'.

New clause 21—Further amendment of the 1989 Act relating to combined heat and power—

'In section 32A of the 1989 Act, after subsection (1), insert—

"(1A) For the purpose of securing that the amount of electricity generated under the obligation is not reduced by the exercise of powers contained in subsection (1)(i), the Secretary shall have the additional power to vary an order under section 32 so as to vary the obligation requirement, based on either the previous calendar year's production of electricity generated by the combined heat and power process or else by his estimate of that which will be produced by the same process in the current year.".'.

Government amendment No. 1

Amendment No. 20, in page 64, clause 81, leave out lines 2 to 24 and insert—

'(1) The main duties of the Secretary of State and the Gas and Electricity Markets Authority (in this Act referred to as "the Authority") in carrying out their respective functions under this Part are—

(a) to protect the interests of consumers in relation to electricity conveyed by distribution systems, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity or the provision or use of electricity interconnectors;

(b) to carry out their respective functions under this Part in the manner which he or it considers is best calculated to further the duty set out in paragraph (a), having regard to—

(i) the need to secure that all reasonable demands for electricity are met, and

(ii) the need to secure that licence holders are able to finance the activities which are the subject of obligations imposed by or under this Part, the Utilities Act 2000 or Part 3 or 4 of the Energy Act 2004; and

(c) to ensure that there is no detriment to the promotion of—

(i) renewable energy, and

(ii) sustainable development.'.

Government amendments Nos. 2, 13, 14 and 8 to 10.

Stephen Timms (Labour, East Ham)

I hope that we will be able to make brisk progress to cover the topics before us. I shall begin by speaking to new clause 4 and the Government amendments in the group, and I hope to catch your eye later, Mr. Deputy Speaker, to speak to amendments and new clauses tabled by other hon. Members.

There is no doubt that microgeneration has an important role to play in reducing greenhouse gas emissions. As the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths) said in Committee, we are already supporting microgeneration to the tune of £35 million through our funding of the major photovoltaic demonstration programme and the clear skies initiative, which provide grants towards the cost of residential or community renewables projects. The distributed generation co-ordination group, which was established by the Department of Trade and Industry and the Office of Gas and Electricity Markets, already specifically examines the integration of microgeneration. We have recently legislated to make it easier for small renewables generators to receive renewables obligation certificates so that they may benefit from such arrangements.

The clause on a strategy for microgeneration that was originally proposed in the other place caused us some difficulties. For example, the inclusion of a duty to set specific targets for the small-scale generation of electricity could have conflicted with other commitments in the White Paper. However, it is clear that there would be distinct benefits if we were to have a clear strategy for microgeneration. Lord Ezra, among others, put it to me that a legal duty to establish a strategy would give confidence to the industry and potential investors, and I accepted that argument before I tabled new clause 4. The provision will impose a clear duty on the Government to publish a strategy on microgeneration within 18 months of its commencement and then to take steps to ensure its implementation.

Government amendment No. 10 is a consequential amendment that will ensure that the microgeneration strategy does not cover Northern Ireland, given that energy is a devolved matter. However, we will remain in close touch with Northern Ireland colleagues as we take the work forward.

On Government amendments Nos. 1, 8 and 9, I do not think that there is much difference between the intention of several Members of this House and the other place and what the Government want to deliver. The aim of the original draft of clause 81 and amendment No. 20, which was tabled by my hon. Friend the Member for Brighton, Kemptown (Dr. Turner), was to ensure that there was a commitment to the development of renewable energy sources and to the principles of sustainable development. I agree with those aims, but if clause 81 remained in the Bill—even as amended by amendment No. 20—it would cause serious problems.

When we published the Green Paper "A Fair Deal for Consumers" in 1998, we made it clear that protecting the interests of consumers would be at the core of independent economic utility regulation, and that was reaffirmed in the Utilities Act 2000. Clause 81 represents a drastic move away from that principle, so it would not be appropriate to adopt it without the minimum requirements of consultation and a full regulatory impact assessment. I argue that Ofgem's current principal objective provides the right balance between existing and future consumers while maintaining the competitive position of the industry. One problem is that clause 81 would be likely to lead to higher electricity prices, which would increase the problem of fuel poverty. Alan Asher, the chief executive of Energywatch, said that the clause would

"have grave consequences for consumers."

We have delivered a long-term framework that will allow investments to be made with confidence, including those in renewable energy.

Brian White (Labour, North East Milton Keynes)

My hon. Friend is aware that regulators primarily look at the face of statutes rather than at their detail. Given that there have been problems with sustainable development in certain parts of the industry, how does he intend to address such regulatory barriers?

Stephen Timms (Labour, East Ham)

I suggest to my hon. Friend that Ofgem is starting to address effectively the challenges of sustainable development in precisely the way in which all of us would wish. That is happening under the arrangements that we have in place, and I shall say a little more about those in a moment.

Clause 81 specifically addresses renewables, but we have a strong and effective renewables policy in place. The renewables obligation is incentivising unprecedented investment in the sector. The British Wind Energy Association estimates that some 350 MW of capacity will be built this year, which is more than three times as much as last year. More than 2,000 MW of wind generation projects have already received consent, and a recent Ernst and Young report ranked the UK as the place with the most potential to invest in new wind energy capacity, and as the second country out of 17 for renewables investment as a whole. The policies that we have in place are delivering the results that we all want to achieve.

The commitment in clause 81 on sustainable development that my hon. Friend underlines is already built into existing energy legislation, which is demonstrated by what is happening at the moment. Both my right hon. Friend the Secretary of State and Ofgem must have regard to environmental matters when carrying out their functions under part I of the Electricity Act 1989. In practice, Ofgem produces regulatory impact assessments for key proposals, including assessments of any impact on the environment. It publishes an annual environmental action plan, and "helping protect the environment" is one of the seven themes of its new corporate strategy. We can see progress made on the social aspects of sustainable development by examining Ofgem's annual social action plan. Ofgem is actively taking forward its brief on environmental and social concerns, so I put it to the House that a sustainable development commitment already exists.

Robert Key (Conservative, Salisbury)

I am grateful to the Minister for giving way on the question of Ofgem's environmental concerns. An independent panel of environmental experts has been established to guide Ofgem's green agenda. The environmental advisory group is made up of policy experts from government, industry and green groups to advise the regulator on the priorities for its work in relation to the environment. However, I was surprised to learn that the nuclear industry, the electricity generator that produces a quarter of our electricity—the most environmentally friendly electricity because it is carbon free—is not part of that green committee. Why not?

Stephen Timms (Labour, East Ham)

The hon. Gentleman helpfully—from my point of view—underlines the strength of Ofgem's commitment to address the issues seriously. We all recognise that the nuclear industry produces a substantial amount of carbon-free electricity, which represents a valuable contribution. Of course, there is a question whether we will have new nuclear capacity in the future, and I know that that topic is close to the hon. Gentleman's heart. I say to him, as the Prime Minister said to the Liaison Committee last week, that there are serious barriers to address. We must consider the economics of new nuclear power and whether people will be prepared to invest in it. Some major issues on nuclear waste also need to be addressed. I welcome the fact that Ofgem has put in place the advisory group to which the hon. Gentleman referred.

Michael Weir (Scottish National Party, Angus)

Will the Minister give way?

Stephen Timms (Labour, East Ham)

I think that I need to make a little progress, particularly in view of the points made by the hon. the Member for Banff and Buchan (Mr. Salmond) about the need for us to be brisk.

Government amendments Nos. 8 and 9 are consequential amendments that are necessary following the deletion of clause 81. Both amendments reinsert parts of other clauses that were deleted in Committee as a result of the introduction of clause 81.

Government amendment No. 2 ensures that the annual reports to be produced under the Sustainable Energy Act 2003, for which my hon. Friend the Member for Milton Keynes, North-East was responsible, cover the implementation of the technologies specified, as well as progress made in research and development. That captures the intent of the amendment tabled by my hon. Friend the Member for Brighton, Kemptown in Committee. There has been a slight change from his original wording—he mentioned deployment—in respect of the phrase "bringing into use", which was included as a result of legal advice. I hope that he will agree that the meaning remains the same.

Government amendments Nos. 13 and 14 are important amendments that seek to improve investor confidence in the renewables market by taking further steps to reduce the impact of a future shortfall in the renewables obligation buy-out fund. During the passage of the Bill, there has been some debate about whether the moves now represented in the amendments can be made. In Committee, we agreed to consider an amendment on this issue tabled by the hon. Member for Hazel Grove (Mr. Stunell). As I said at the time, the case for mutualisation or recovering some or all of a shortfall after it had arisen has been made here and in another place. We have listened to those arguments and taken account of developments in the market, some of which have strengthened the case for mutualisation in recent months.

I should make it clear that while our amendments go further than the existing provisions in clause 116 in reducing the impact of a supplier shortfall, I am under no illusion that they will remove the risk of a shortfall altogether. The renewables obligation is a market mechanism. There is inevitably an element of risk as companies can and do fail. What we want to achieve is a balance between reducing the risk and impact of shortfalls and not placing undue additional burdens on consumers or adversely affecting competition.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I thank the Minister for tabling the amendments. Is he entirely satisfied that the mechanics that they set out will deliver the benefit that he asserts they will? There seem to be some technical problems, about which I have received representations, and I would be grateful for his reassurance on that point.

Stephen Timms (Labour, East Ham)

I think that the amendments deal with those issues, and if the hon. Gentleman wants to put to me a detailed point about mechanics, I shall be happy to look at it.

The amendments need to be seen as part of a set of measures to address the problem of supplier defaults, sitting alongside the measures already set out in clause 116 to address reductions in the length of obligation periods and impose surcharges on late payments. Together, those provisions are a sensible response to the problem of supplier default, and a balanced one that provides a measure of protection for the buy-out fund at an acceptable cost to consumers.

David Drew (Labour/Co-operative, Stroud)

Does my hon. Friend accept that one of the problems during the period of default of a major supplier is that the administration process may not prioritise the renewables obligation certificate? Will he talk to his friends in the Department to ensure that we clarify the situation with regard to the administrative process, with particular regard to this aspect of energy production?

Stephen Timms (Labour, East Ham)

I shall be happy to talk to my officials along those lines, although I am not sure whether anything further can be done on that front. I pay tribute to my hon. Friend, who has followed the matter with close interest and raised it frequently with me. I think that he will welcome the steps taken in the amendments as an effective response to the problem.

In broad terms, Government amendment No. 13 gives the Secretary of State power to introduce an order requiring licensed suppliers to make additional payments following a shortfall. A number of detailed issues will need to be addressed, such as how the payments are assessed, when the suppliers need to make them and over what period and at what level they need to be made. Perhaps the issue that my hon. Friend has just mentioned will also arise. Those will all be the subject of a statutory consultation exercise later this year, before the detailed changes to the renewables obligation can be made. The amendments enable us to introduce mutualisation to recover part or all of a shortfall, and so give some additional confidence to the renewables market.

I hope that the House will welcome those amendments, and the other Government amendments and new clause.

Laurence Robertson (Conservative, Tewkesbury)

It is a pleasure to follow the Minister in speaking to the amendments.

The Bill was greatly improved by Members of the other place and was the subject of interesting debate in Committee. It started off as a necessary and functional Bill when the Government introduced it into another place, but their lordships greatly improved it by introducing a number of measures that went beyond the original content. One of those measures was a clause relating to microgeneration.

It would indeed be a useful step forward if every household in Britain could generate electricity as well as use it, particularly if they could do so from renewable sources. Such electricity could be used as it was generated or sent to the grid for use by business at that time. The household could perhaps draw other electricity later in the day when it needed to do so.

Obtaining maximum benefit from such an arrangement would probably require a change in building regulations. Although their lordships' amendment did not go so far as to make such a suggestion, it was very useful in that it sought to require the Government to produce a strategy on microgeneration—a strategy that could perhaps include an intention to amend building regulations to require all new houses to be fitted with solar panels, for example.

Their lordships' amendment also included a requirement for the Government actually to set targets for microgeneration. I understand that the Government have varied the amendment slightly and are saying that specific targets for microgeneration would cut unhelpfully across other commitments in the energy White Paper relating to renewables and combined heat and power. That is their reason for attempting to change the original Lords amendment. I think that that is a little unfortunate, because I do not see how that could happen. In many ways, those strategies are very different. However, we are where we are, and given that new clause 4 is the only one available for the House to consider today, we will support it.

I should like to spend a little time speaking to new clauses 20 and 21, however, which were tabled in my name and those of my hon. Friends. New clause 20 attempts to put back into the Bill another amendment that was made in another place, introducing a clause that attempts to increase the use of combined heat and power—a process that is more efficient than other forms of generation, because it uses the surplus heat that is used for generation in the first place.

In respect of a number of combined heat and power proposals, planning permission has been obtained, but nothing has yet been built, and a number of CHP plants are running at below capacity. I understand that is the case because there is a lack of confidence and investment in generation at the moment, which is a general problem that must be addressed. However, given that we all want to cut emissions and that it is recognised, certainly by the Opposition, that there may be a problem with security of supply in the medium term due to that lack of investment, a greater contribution from CHP would be very good news indeed. The Government must have recognised that that was the case when they set the CHP target of 10 GW by 2010, but the industry is apparently on course to realise between only 7 and 8 GW by that date unless something is done to help it along. That is what new clause 20 is all about.

My discussions with the Combined Heat and Power Association have led me to believe that excluding CHP from the renewables obligation calculation would in fact provide sufficient encouragement to the industry, enabling it to have a more realistic chance of reaching the Government's own targets. In Committee, however, the Government had the original clause removed, basically because they claimed that removing CHP from the renewables obligation calculation would have an adverse impact on the use of renewables. The CHPA disputes that fact. New clause 21 would give the Secretary of State the power to amend the renewables obligation target if necessary, based on the previous year's or the present year's CHP production, to counter any possible adverse effects on renewables. That is complicated, but I am sure that the House is with me.

I accept that that arrangement could cause a seesawing of production from each source, but that is unlikely once the investment in each has been made. It would move us along towards cutting our emissions, again in the way that the Government say that they want to do; otherwise, we may have a problem in meeting the emissions targets by making the cuts in emissions that we all want. Renewables, which we all support, are struggling along, and most commentators feel that the 2010 and 2015 targets are challenging, to say the least. Over the next 20 years, the nuclear industry will be reduced to providing just 2 per cent. of our electricity generation from its present output of 22 per cent., unless there are extensions or new build. Even if renewables entirely replaced nuclear—and there has to be a big question mark over that—we would have gone absolutely nowhere on cutting carbon emissions, because, as the Minister acknowledged, nuclear emits no carbon. That point is frequently made by my hon. Friend the Member for Salisbury (Mr. Key).

Combined heat and power can make a contribution in that situation. However, the Government seem to be saying, "Carbon emissions bad, no carbon emissions good." That is true, but surely lower carbon emissions, as with CHP, represent a move in the right direction. It is wrong to say that because it is not a zero-carbon process it should not be encouraged, because if it emits less carbon, it is better than those methods which produce much carbon.

I am disappointed that the Government chose to strike out the help and encouragement that we are trying to give to the CHP industry. If they believe that our amendments were and are imperfect, I regret that they did not and have not proposed their own, nor have they proposed any form of assistance to the CHP industry. That will be a great disappointment to it.

I should like to give encouragement to the Labour Members who, in Committee, proposed the amendment on clause 81, which deals with the principal objective to promote renewable energy. I have no intention of stealing their thunder by speaking against Government amendment No. 1, which seeks to undo all their good work, but I assure them that if they oppose that amendment and force a vote, they will find us in the same Lobby. [Interruption.] I remind Labour Members that we won that vote in Committee, so there is all to play for.

On the new clauses relating to the renewables obligation, we support moves to strengthen the security of the obligation in terms of moneys paid in, or due to be paid in, and we recognise the Government's attempts to achieve that through new clauses 13 and 14. Although, like Liberal Democrat Members, we have one or two concerns, we recognise the need to improve that obligation and accept that the Government are doing their best to move in the right direction in that respect.

I do not intend to say much about new clauses 2 and 3, which deal with energy efficiency. Indeed, I should like to draw attention to the fact, almost as a point of order, Mr. Deputy Speaker, that this morning we were informed that my hon. Friend the Member for Vale of York (Miss McIntosh) would be able to move those new clauses, but it subsequently turned out that that advice was incorrect. I regret that, because she would have spoken with far more eloquence and knowledge than I could possibly muster.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Gentleman appears to be combining a point of order with his speech. It is for Front Benchers to decide which Front-Bench spokesmen will deal with the debate—it is not a matter for the Chair.

Laurence Robertson (Conservative, Tewkesbury)

I was advised only this morning, Mr. Deputy Speaker, that two Members could speak from the Front Bench on this particular group of amendments—probably because it comprises such a broad range of amendments and new clauses. That advice turned out to be wrong, but I will not detain the House any further on the matter.

If my hon. Friend had spoken, her main point would have been that we are puzzled as to why a Government who love setting targets have removed their very targets relating to household energy efficiency. Will the Minister explain that about-turn?

We support the clause requiring the Government to produce and implement a microgeneration strategy, although we regret the slight weakening of its original proposal. Will the Minister explain why the Government are opposed to the amendments relating to combined heat and power? If he intends to say that the amendments are imperfect, what strategy will the Government develop to help the CHP industry to contribute to the clean and efficient generation of electricity, and how they will move that industry forward to give it the confidence that its representatives say that it needs?

Brian White (Labour, North East Milton Keynes)

The amendments reflect key debates in Committee on a range of subjects. New clause 6 tries to take forward the issue of energy efficiency in relation to debate on the old clause 3, as it came from the House of Lords. It would establish the concept of a policy goal across the United Kingdom, an aim that differs slightly from that of the Sustainable Energy Act 2003.

The Tory amendments put me a position that I do not much like. I must have forgotten the first rule of politics, which is never to trust a Tory promise. What is worse, that allows my Whips to say, "I told you so." I suppose that lessons are always worth reinforcing. What saddens me about the amendments and the incompetence with which they were moved is that, as was amply demonstrated, the Conservatives see the matter as one for point scoring, not one of taking forward a serious issue. As for the hon. Member for Tewkesbury (Mr. Robertson) trying to tempt us to vote with the Tories, any chance of my doing that went out the window with his opening speech. I shall try to touch on some of the real issues involved in energy efficiency, combined heat and power, and the way in which renewables and micro-generation need to develop.

When we originally discussed the energy White Paper, the then Minister, my right hon. Friend the Member for Cunninghame, North (Mr. Wilson), cited 20 per cent. as the contribution that could be made by energy efficiency. That translated into 5 megatons of carbon savings, but we are now talking about 4.2 megatons, or about 16 per cent., of savings. The White Paper said that residential energy efficiency was the cheapest, cleanest and safest way to achieve CO 2 emission reductions. It seems absurd to reduce our key target for achieving our carbon-saving objective. Surely we should be setting challenging targets, not reducing them. That has an impact on the energy efficiency savings industry, which sees it as one of the key things that it can take to the market in developing its investment strategies, as was made clear in a letter to the Prime Minister on 11 May, in which the industry stated:

"we cannot stress highly enough the seriousness of the blow dealt to the energy efficiency industry by this . . . reversal of Government policy"—

the reduction from 5 megatons to 4.2 megatons. The letter continues:

"This has caused a major crisis of confidence."

How do we ensure that the industry makes investment, that we do not repeat the mistakes of the past and that the industry can move forward? I question the figures on which the Minister has based his judgment about the 4.2 megatons.

The Energy Savings Trust, which had worked on the figures for some months, gave evidence to the Environmental Audit Committee on 25 May, stating:

"We were involved in developing the Plan . . . we . . . did not have the final decision and we do not agree with it."

It gives several reasons for that, and I am sure that the Minister has examined the evidence. The trust claims that some matters were not taken into account, such as a recurring annual saving. Several other measures were not factored into the plan.

I stress that I appreciate that the Minister has to take the flak, I understand that the Department wants to do as much as possible for energy efficiency, and I thank him for his work since Committee. However, many people support a challenging aspiration. They say that the key way in which to achieve our carbon savings is through energy efficiency. I hope that our debate will allow the Minister to take the matter forward and work with the industry to ensure that savings from the residential energy efficiency sector can be more than the proposed 5 megatons.

Government amendment No. 1 would remove clause 81. In an intervention, I asked the Minister how he intended to implement something that was not on the face of the Bill. There is a problem, which applies to several independent regulators. How can we square Government policy with the role of an independent regulator? Bryan Carsberg, the first telecoms regulator, said that the regulator would always go back to the statute book. That constitutes the regulators' terms of reference. If a provision is not on the statute book, a barrier is created.

What happened to combined heat and power after the introduction of the new electricity trading arrangements is an important indicator of the impact that a regulator can have. Those events could be repeated. I understand that the Minister wants to ensure that they are not, but the regulatory framework that could allow that to happen still exists.

The problems in the renewables industry do not arise because the companies are not viable or because they do not do good work, but because of the regulatory hurdles that it has to overcome. The Sustainable Energy Act 2003, which introduced regulatory impact assessments into Ofgem's work, has improved matters. At a meeting of the Liaison Committee, the Prime Minister said:

"We believe we will meet the target for renewables, but it is challenging and I think that there is a need, as we are doing, to step up investment in renewables . . . and it is one of the issues that we will be raising in the context of our G8 chairmanship next year . . . This requires an awful lot of investment in research and development."

He is right that a step change is required, and for that to happen, we must remove some existing barriers. One such is Ofgem's terms of reference. I appreciate that the Minister has to ensure, in removing clause 81, that the barriers are not replicated.

We need to ensure that there is a public awareness campaign for energy efficiency. We need to build capacity in the industry and to stimulate uptake. Those are important issues but they all come back to the way in which Ofgem interacts with Government policy. We have given Ofwat a sustainable development duty, but it does not apply to Ofgem. The question of whether environmental issues are at the heart of government needs to be answered in the context of regulators' duties. If we are adequately to tackle sustainability, consistency should apply to water, electricity and all the other regulators. As the Government remove clause 81, I urge them to consider the way in which we remove regulatory barriers.

We have a history of targets for combined heat and power. Representatives of the industry have been to see the Minister, and there is a crisis of confidence about investment, including in micro combined heat and power. In Committee, the Minister made several comments, with which I shall deal shortly. First, though, I thank him for being prepared to meet industry representatives and for the meetings that he has held since Committee. They have been helpful, and I place my thanks on the record.

In Committee, the Minister said that removing the renewables obligation on CHP would mean an impact of less than 0.3 MW. The Combined Heat and Power Association said that more than 2,000 MW of CHP plant is currently on hold and that much of it could be realised if such a provision was in place. If we are not to introduce such an exemption, it is incumbent on us to find other mechanisms to ensure that the CHP industry can move forward.

Many hon. Members wish to speak, and we have already heard a point of order on that. I shall therefore be brief. We need to ensure that the energy efficiency, CHP and renewables industries have open-door access to the Minister. The key players in each industry are the same. Their investment decisions will determine whether we are successful. It is immaterial whether the amendments are successful. What matters is the Government's interaction with the industry. I urge the Minister to accept that dialogue with the industry on microgeneration, the renewables obligation and energy efficiency is critical and needs to be taken forward.

Norman Baker (Liberal Democrat, Lewes)

I acknowledge that the Bill is a better measure than some of us might have dared to hope. That is partly because it was well scrutinised in Committee by members of all parties, including Labour Back-Bench Members, such as the hon. Member for Milton Keynes, North-East (Brian White). In addition, the Government have listened to several points, and some Government amendments reflect our discussions in Committee. Those of us who are ready to criticise the Government regularly for failing to listen should give credit when there is evidence that they have listened. That is not to say that the Government amendments are perfect, that everything will be hunky dory or that energy efficiency, combined heat and power and renewables will take off like a jet liner, but it is to say that the Minister and his colleagues are willing to understand the arguments. I want to put that on the record.

Government new clause 4 on microgeneration is welcome. Although it does not go as far as some of us would like, it is a step in the right direction. I am worried that we are not maximising opportunities for microgeneration. For example, we have not yet found a method of ensuring that the million meters that are replaced each year are two-way meters so that net metering is maximised. The Minister knows that British Gas has mothballed micro CHP design because it cannot envisage a market for the project. There are problems with microgeneration but we are making some progress.

We have not made sufficient progress on energy efficiency. Hon. Members of all parties are disappointed by the downgrading of targets. The Minister was prepared to endorse in Committee the reduction in expected energy efficiency savings from the domestic sector. When he was challenged, he said that the industrial sector was run rather better and that the Government did not worry too much about the matter. That response was complacent and inappropriate because his point should be perceived as an extra gain rather than a substitute. I fear that he is getting into the position of identifying what is happening in the market and subsequently setting a target to reflect reality rather than setting a target that requires a change of policy. That is a fundamental mistake when it comes to something as powerful and important as energy efficiency. After all, there is a drastic need to reduce carbon emissions in this country as well as globally.

The 20 per cent. target for carbon emissions to which the Government are adhering is very challenging, and I regret that we do not appear to be able to meet it. The Minister will be aware that, in the six years since his Government came to power, we have seen a net reduction in carbon emissions of only 0.2 per cent., so it is difficult to imagine that we can achieve 20 per cent. from such a low base. One way for the Minister to get there, if he tries hard, is to use energy efficiency to its maximum capacity. To do that, we need to set challenging targets.

Energy efficiency is the best of the options. It is clearly better than fossil fuel burning. It is also better than nuclear power, which the hon. Member for Salisbury (Mr. Key) promotes so assiduously. Nuclear power has a number of downsides, which we might discuss later. Energy efficiency is even better than renewable generation, because that, too, has downsides, as Conservative Members in particular are keen to point out whenever the opportunity presents itself. Energy efficiency and conservation seem to offer a wonderful solution, because they reduce the amount of energy consumed. The Minister ought to be championing those causes, but I do not think that he is.

I am disappointed that the target has been downgraded, and if the House votes today on any of the amendments that seek to reinstate a higher one, my colleagues and I will be happy to support them. I would say to the hon. Member for Milton Keynes, North-East that we would do that on the basis of sensible policy rather than on the basis of point scoring. He would acknowledge that that is where we are coming from, at least on this issue. I would like to put it on the record, by the way, that I have signed his new clause and the one tabled by the Conservatives, both of which point in the same direction. We are happy to secure energy efficiency gains, wherever they come from, and we are prepared to have some very odd bedfellows in order to achieve the target that we want.

New clause 19 appears, mistakenly, in the amendment paper to have been tabled by the hon. Member for Angus (Mr. Weir). It was in fact tabled only by my hon. Friend the Member for Hazel Grove (Mr. Stunell) and me, although I am delighted that the hon. Gentleman has joined us. I do not really mind whose name the new clause is in, provided that the Government accept it. It is our proposal for a renewable heat obligation, which is a serious matter. The Minister will know that energy for heat makes up approximately one third of the UK's demand for energy. The Government recognise the contribution of renewable heating systems to the UK's climate change programme but having recognised it, they have not introduced a dedicated policy to support the low-cost, proven carbon abatement option. That shows a gap in their energy strategy.

Perhaps the Minister will have recognised by now that we are collectively trying to turn the Bill—which is actually a nuclear bail-out Bill with some wind energy tacked on—into a proper, sustainable, comprehensive energy Bill. We have made some progress on that, and new clause 19 would go further. The Minister will be aware that the case for extending the concept of the renewable obligation to include renewable heat and creating similar incentives for industry to those operating in the electricity industry was put forward by the Royal Commission on Environmental Pollution, in its May 2004 report on biomass as a renewable energy source. Page 39 of that report states:

"It has become clear to us that the most obvious gap in the current support schemes is the lack of any mechanism for supporting the generation of renewable heat energy comparable, for example, to the renewable obligation scheme for renewable electricity. We recommend that the Government introduce such a support mechanism."

The new clause gives voice to the commission's recommendation, and I hope that the Government will therefore be minded to support it, or at least to tell us how they intend to take forward that proposition.

It is not enough to allow the market to fill the gap. There is a proper role for markets. Indeed, these days, there is considerable consensus across all three parties—or perhaps all four or five—on the role of the market in energy. That debate, which was quite lively 10 or 15 years ago, has largely dissipated. However, there is an issue over the extent to which Government policy should drive markets or set down the railway lines along which they travel. There was some discussion about that in Committee between the hon. Members for Southampton, Test (Dr. Whitehead) and for Milton Keynes, North-East, myself and others.

If the Minister wants renewable heat to play a significant role in the Government's energy policy, which I suspect he does, he will have to do rather more than he has done so far, because it is not happening in any meaningful way. The Government need to intervene, at least to set the framework in which things can happen. In regard to the operation of CHP plant, the year after the new electricity trading arrangements—NETA—were introduced, CHP output fell by 15 per cent., and 2002 saw the first fall in CHP capacity since the electricity sector was privatised. Indeed, many people believe that NETA continues adversely to affect the operation of CHP plant, and little has been done to overcome that. That is a serious issue, and I hope that the Government will address it.

The Minister referred earlier to Ofgem's duties and responsibilities—they are two different things. He picked up a point made by the hon. Member for Milton Keynes, North-East about what the duties should be, and whether they should be put into legislation. I concur with the view that something set down in legislation does not carry the same weight as guidance, speeches by Ministers or comments on television and radio programmes. We need something about this issue in the legislation. If some provisions are included in the legislation and others are not, it will be natural for Ofgem, or any regulator, to interpret those two kinds of provisions in different ways.

In the electricity legislation, there is a duty on Ofgem to look after consumers. Indeed, in its whole history, Ofgem has operated in the way the legislation established it to do. I am not criticising that in any way. Ofgem was established to liberalise markets and to drive down the price of electricity. That is what it was set up to do and, by and large, that is what it has done. While those outcomes are not undesirable, however, it has never had a primary duty to act in a sustainable way.

There has been so much criticism of Ofgem from so many quarters for failing to act in a sustainable way that it is now, belatedly, identifying ways of doing so. It has moved in that regard, and I do not wish to pretend that it has not. However, unless the legislation contains a primary duty to take sustainability into account that is of equal weight to Ofgem's requirement to act in the interests of consumers, it will not give the same weight to that duty. I believe that hon. Members would like it to accept such a primary duty and, frankly, it should be required of it if we are to have an energy policy based on sustainable outcomes that optimises energy efficiency and seeks to reduce consumption in a sustainable way, and to drive forms of energy that are less polluting and environmentally damaging than those on which we currently rely for the majority of our energy needs. Will the Minister think again about how we can get Ofgem not only to recognise this issue but to put it on the same level as some of the other activities with which it has been charged by existing Acts of Parliament?

I welcome the fact that the Government have listened to some of the points raised in Committee. I believe that they did so partly because those points were well put, and also—I hope that I can say this without sounding patronising—because Labour MPs were able to articulate sensible policy points without being disloyal to their Government. I think that that sharpened minds at the Department of Trade and Industry. We have a better Bill as a consequence, and better amendments before us today, but there are still gaps. More work is needed on energy efficiency, and I hope that the Minister will return to the Ofgem issue in some form.

Brian Wilson (Labour, Cunninghame North)

I will speak briefly, because I very much endorse the points made at the opening of these proceedings on the need to make time for a full discussion of the last group of amendments later on. It would be scandalous were there not time left for discussion of those important issues.

Briefly, I want to support the new clause on micro-generation. In doing so, I declare a relevant interest, as contained in the register. My real interest, however, is to allow the largest number of individuals to participate directly in the growth of renewable energy. Up until now, that has been almost entirely missing. Millions of people support renewable energy, and want to participate in it, and every petition against renewable energy and every campaign locally or nationally against renewable energy opens with the preamble, "While I am in favour of renewable energy in principle . . . " What we want is an opportunity for people to participate in practice.

Perhaps it would be easier to introduce a large number of small renewable energy units than it is proving to be to get a relatively small number of very large renewable energy units. The references in today's debate to combined heat and power offer a timely warning: setting targets, commissioning reports, and doing all the mechanistic things to show good intent are easy, but they do not in themselves deliver a single watt of electricity. While the targets for CHP were more ambitious than those for renewables—which is not widely realised, because they were expressed in quantity terms rather than percentage terms—when I was in the job that the Minister for Energy, E-Commerce and Postal Services now holds, the actual performance was going down rather than up. Setting targets is not much good in itself. For any of those things to be effective and to be implemented, they must be carried through on a cross-government basis. Every propeller must turn in the same direction if there is to be delivery as opposed to fine words and poor outcomes.

In commending my hon. Friend for the new clause on microgeneration, I want to raise one issue, which is crucial to delivery of the good intentions—planning. Unless something is done on a radical scale, and rapidly, about planning, it will end up in the same impasse in which so much else in relation to renewable energy is currently languishing. What is needed, whether people want to install wind, solar or any other micro-units in their homes, is some simplified, generalised planning procedure on the same principle as that for satellite dishes. We need a general permitted development order rather than the absurd situation in which local authorities must deal with every application on an individual basis, making the whole process unwieldy and unviable.

I cannot resist returning to a story in relation to the protestations of the hon. Member for Lewes (Norman Baker). In a similar debate, I remember drawing attention, in a ministerial capacity, to the antics of Lewes district council, of which he has some knowledge. While the Liberal Democrats were marching round the country preaching higher renewables targets, Lewes district council, under Liberal Democrat control, was busily turning down applications for solar panels in people's houses on the grounds that they were unsightly. I believe that the council mended its ways subsequently.

Norman Baker (Liberal Democrat, Lewes)

I am grateful to the right hon. Gentleman for raising that issue while I am in the Chamber. When that application first came in, I wrote to the Government for advice on it. I wrote to the Department of Trade and Industry and the Office of the Deputy Prime Minister about what advice the Government could give to local authorities. The Government refused to say that local authorities should give permission to such applications. That advice was passed on to Lewes district council. He ought to examine ministerial advice before he attacks a particular council.

Brian Wilson (Labour, Cunninghame North)

I think that the hon. Gentleman is confused. I do not want to get into that argument, but my precise point is that if it is left to individual councils to make individual decisions, the result will be the sort of ideological confusion displayed by his local council. There must be some general principle. Government must be more proactive in giving guidance to local authorities to make that happen, rather than leaving it to the foibles of individual local authorities. As a follow-through to the welcome new clause, there must be rapid communication with the ODPM.

To reinforce that point, someone who had written to the ODPM about the installation of small windmills received the following reply:

"I believe that the issue at stake is whether their design would require planning permission or whether it would fall within the remit of 'permitted development rights'. This is not something on which ODPM can advise you. Such a decision could, ultimately, only be made in the courts, but in the first place it would be a decision for the local planning authority, taking into account the location, size and surroundings of the proposed siting, together with the Government's planning and energy policies encouraging the use of renewables."

If that is to be the approach, we can have as many targets and as many reports back as we want, but in practice not very much will happen.

All that I ask for is a logical follow-through from the good will that has been expressed by the Minister today. Let us make this happen so that millions of people can participate directly in renewable energy.

Robert Key (Conservative, Salisbury)

It is a particular pleasure to follow the right hon. Member for Cunninghame, North (Mr. Wilson), whom I had the pleasure of shadowing when he was a Minister, and we rarely disagreed about anything. Of course, that may be the reason why he is no longer the Minister. It is also a pleasure to have the current Minister here today—

Brian Wilson (Labour, Cunninghame North)

Has the hon. Gentleman considered the possibility that it is also the reason why he is no longer shadowing anyone?

Robert Key (Conservative, Salisbury)

The right hon. Gentleman is very kind, and we go back a long way.

The present holder of the office, however, has helped us in admirable ways through the passage of this Bill, but it is nevertheless good to hear the common sense being spoken by the right hon. Gentleman. Of course, he is right about planning. For all sorts of reasons, it was a great disappointment to me that the Government produced a Green Paper on planning that looked as if it was going to move forward, and within months, all the things that would take us forward had been abandoned and taken out of the original proposals.

I want to support Government new clause 4, for the reasons that my hon. Friend the Member for Tewkesbury (Mr. Robertson) has suggested, and his new clauses 2 and 3. I feel that combined heat and power has been neglected for far too long. I have thought that for a very long time, and I have been disappointed that the Government have not seemed to know quite what they are doing about it. It must be some four years since I visited the combined heat and power plant at Slough estates, for example. Since then, the situation has steadily deteriorated. If we see what is happening on the ground on such an estate, and if we listen to the day-to-day problems in relation to the sources of fuel, rules and regulations, and different tax levels depending on what waste is being burned on a particular day, we realise that it is not being addressed seriously.

I was therefore particularly sorry, but by no means surprised, to read in Hansard this morning, in a written answer, in a section on combined heat and power, at column 878W, that the study on combined heat and power potential due for release in January 2004 will be published shortly. Come on—January 2004 was the date when we were told that it would be published, and it still has not happened. In the same section, there is a question from a Member asking whether the Secretary of State

"will publish details of the Combined Heat and Power Quality Improvement Programme mentioned in the CHP Strategy."

The DEFRA Minister replied:

"In common with the other measures set out in the strategy that have not yet been implemented, this programme is currently in development."—[Official Report, 12 July 2004; Vol. 423, c. 878W.]

Here we are, in the closing stages of the Energy Bill, and the Government have simply not decided what to do about combined heat and power. I regret that very much, because it is extremely important.

I also want to support new clause 19. There was an interesting little dispute earlier—a little flurry. The Liberal Democrats showed a bit of amour propre, feeling that their new clause had been pinched by a Scottish Member. There is a lot of thinking behind it, from Friends of the Earth among others. If Friends of the Earth think that the Liberal Democrats can deliver anything at all in terms of energy policy, they are making a sad mistake—but of course they do not think that, so they are not making a sad mistake.

Many good Conservatives in my constituency support a number of Friends of the Earth's objectives. I just wish that Friends of the Earth would go a step further. Go the extra mile, Friends of the Earth, and admit that we cannot reach our emissions targets over the next 20 years unless we embrace a new generation of nuclear power. It cannot be done: there can be no argument about that. Come on, Friends of the Earth, get real. Then we can make some progress instead of sniping from the sidelines.

What I like about new clause 19 is the provision relating to employment in the United Kingdom's agriculture industry. That is hugely important, especially in constituencies like mine. Opportunities for the rural economy would be revolutionised if our farmers could produce crops for energy, not just for fuel, subject to the vagaries of the international markets. That would also make a real contribution to the energy security of our country.

Heat accounts for roughly a third of our demand for energy, and renewable heat is a low-cost way of reducing carbon emissions. Currently, however, it receives no dedicated support in the marketplace. There is no doubt that energy policy in this country is skewed in all sorts of ways, not least because we do not have a carbon tax. I do not think we believe in a carbon tax, but in my opinion we should reconsider. One reason for the imbalance is that energy policy supports renewable sources of electricity, but not of heat. As I have said, a third of our demand is for heat.

We are a long way from our national climate change target. Emissions levels since 1997 have remained virtually unchanged. Renewable heat is a low-cost form of carbon abatement. Under the climate change levy, tax on heating fuels is a third of that on electricity, 0.15p per unit compared with 0.43p. That implies that the buy-out price of a unit of renewable heat would be only a third of that for renewable electricity—£10 per megawatt hour. The Government could achieve carbon savings at minimal cost to the consumer and to industry. The new clause is an enabling provision which does not appear to commit the Government to any action, but maximises the legislative opportunity provided by the Bill. The results of consultations on renewable heat could be quickly enacted by means of secondary legislation.

Sources of renewable heat use proven technologies and can be quickly deployed. They include wood-fuelled boilers, biogas, solar thermal and ground source heat pumps. I am particularly keen on the latter. We have heard nothing about them during the Bill's passage so far, but we need only cross the English channel to see them being developed on the continent. There are one or two exceptions in this country: I believe that Leicester is using ground source heat pumps in municipal developments, and other towns may be doing the same.

Alan Whitehead (Labour, Southampton, Test)

The hon. Gentleman may wish to visit Southampton and see the geothermal energy project at work.

Robert Key (Conservative, Salisbury)

I am delighted to hear that that is happening in Southampton, which is just down the road from Salisbury. Such technology, however, is having a minimal impact, and not many people know about it.

Unlike, for example, direct solar panels on roofs, ground source energy is already there. As we have seen in Canada, heat can be extracted from soil whose temperature is below freezing. It is a remarkable technology, and we should take it more seriously. Long-term investment is required, but it is certainly a possibility. We need this enabling legislation, which is supported in recent reports including one from the Royal Commission on Environmental Pollution. Page 39 of "Biomass as a Renewable Energy Source", published in May, states:

"It has become clear to us that the most obvious gap in current support schemes is the lack of any mechanism for supporting the generation of renewable heat energy, comparable for example to the Renewables Obligation scheme for renewable electricity. We recommend that the government introduce such a support mechanism."

The Department for Environment, Food and Rural Affairs commissioned a report from Ilex Energy Consulting in December 2003. That report, entitled "Policy Mechanisms to Support Biomass-Generated Heat", states:

"Ilex recommends that the government focus on the option that appears to be the most effective in terms of delivering significant quantities of renewable energy at least cost. In Ilex's view this would be some form of obligation mechanism with tradable certificates similar to the existing Renewables Obligation."

Those strike me as pretty good reasons for supporting new clause 19.

In the spirit of the national interest rather than party policy, I am prepared to support new clause 19, which I find interesting. Above all, however, I hope that the message sent during the closing stages of the Bill's progress will be that we must all get real, and stop sniping at each other about whether we are greener than the next man or woman. That is not really relevant. We need to get together, and conclude that of equal value in tackling the problems of global warming are nuclear energy and renewables of all kinds, including tidal movements. If we could make some progress, even at this late stage, it would be very welcome to our constituents.

Desmond Turner (Labour, Brighton, Kemptown)

I thank my hon. Friend the Minister for accepting the principle of my amendment in Committee and incorporating the progress on deployment of renewable energy in his reports relating to the Sustainable Energy Act 2003.

There is no disagreement between the Government and me—and, probably, many other Members—on what we want done to encourage the use of renewable energy. We want to ensure that there is a stable, friendly environment in which investment in renewable energy can take place and that investors can feel confident that that environment will continue for some time. We are talking about long-term investments that carry high risks, apart from regulation. We want that to be absolutely clear.

It is one thing to have an environment that is suitable for investment in wind power, as we currently have, but if we are to achieve our renewable energy targets we desperately need to use other technologies, notably our marine technologies, the risks of whose initial deployment will be very much higher, and hence the challenges to investors will be very much higher as well.

The message that I receive from serious players in the energy market—not just people in sandals—is that investors regard Britain as a difficult market for investment in renewable energy. Their greatest concern is a political one, involving the regulator. That is probably very much coloured by the history of the regulator. I am glad to note that, since Ofgem's reconstitution last autumn, it has been an entirely different animal, behaving in an entirely different way. It has been taking serious note of the guidance issued by the Minister. A disjunction still exists between what the legislation states is required from the regulator, what the Government are asking the regulator to do and what the regulator currently does. That is fine, so long as the relationship between the Government and the regulator is good, and that they both agree and work to the same agenda. Sadly, such a relationship cannot be agreed for all eternity. In my view, it is common sense to bring the statutory duties of the regulator—clause 81 couples the regulator with the Secretary of State, so the regulator would not act on its own—into line with future objectives.

I freely admit that clause 81's drafting goes too far, because it makes renewable energy the sole primary purpose. The regulator responded to clause 81 by saying, "Ah, if you are going to make that my prime duty, I will do nothing else and the market will pay", despite the fact that clause 81 states that the change should occur with due regard to other factors such as competition, consumer protection and security of supply, which are also part of the regulator's duties. The primary duties stated on the face of the Bill are important and the regulator cannot get away from them. Amendment No. 20 attempts to get round that problem by maintaining the current primary duty of the regulator and associating it with security of supply and the protection of sustainable energy, which it makes primary duties too.

The DTI helpfully provided me with its technical analysis of my amendment, which it does not agree with, although one would not expect it to. It points out that the amendment relegates consumer protection from being the principal duty to being one of a number of duties, but I think that that is sensible. What do we mean by consumer protection? We are all consumers and, as a consumer, I want not only the cheapest possible unit of electricity, but to be sure that the lights will not go out, so I am concerned about the security of supply, which is also a matter of consumer protection. I also want protection from climate change, which is a long-term consideration and the ultimate in consumer protection.

Brian White (Labour, North East Milton Keynes)

Does my hon. Friend know that the Communications Act 2003 recognises the difference between a consumer and a citizen and that the Water Act 2003 recognises the role of sustainable development as distinct from consumer protection?

Desmond Turner (Labour, Brighton, Kemptown)

I was not aware of that detail, but I am grateful to my hon. Friend for pointing it out, because it makes sense and provides a precedent for amendment No. 20.

I am happy for clause 81, in its current form, to go—I will not oppose the Government amendment to delete it—but I hope that the Government will think seriously about the principles behind amendment No. 20. As it happens, DTI officials also pointed out that having a number of similarly weighted duties would make it difficult for the regulator to balance priorities, but the Government and the regulator must balance priorities anyway—if they did not do so, we would return to the situation under the previous regulator, when market prices dominated everything to the detriment of renewable energy and combined heat and power. The balancing act is inevitable and we cannot get away from it. We must get the semantics right and the Electricity Act 1989 must be amended.

Officials also pointed out a technical drafting flaw in my amendment, and they are right, which is a slight problem, so I will not take up the invitation of the hon. Member for Tewkesbury (Mr. Robertson) to set off a rebellion. However, I know that my hon. Friend the Minister agrees with me on the intentions behind regulation and I earnestly hope that he will undertake to re-examine the regulator's current statutory duties and make it clear to market investors that they can invest with confidence in the regulator. Investors will have enough problems in financing the development of new technologies to a commercial level and in moving the technology into the harsh marine environment, so let us make sure that neither Government policy nor the regulator's interpretation of Government policy is ever allowed to form a barrier to them.

Richard Page (Conservative, South West Hertfordshire)

I shall start by taking up the point made by the hon. Member for Banff and Buchan (Mr. Salmond), who spoke about the time available on Report. The 11 Government new clauses, plus two Government amendments that are long enough to be clauses, are unacceptable and should be considered in Committee. This important Bill has been through a gestation process in a Department, a Green Paper, the other place and here, so the amount of material in front of us today is not right. However, given the Government's power and huge majority, I shall get on with the few points that I intended to make in the first place and not delay the House long, otherwise the fears of the hon. Gentleman will be realised.

I welcome new clause 4, which clarifies the purpose of a microgeneration strategy and provides a clear definition. I want to discuss the removal of the duty on the Secretary of State to impose targets. In a letter to members of the Committee on 28 June, the Minister for Energy, E-Commerce and Postal Services stated that the removal of targets constituted

"the only fundamental difference from the original clause"—

clause 120. I must delicately point out that one or two more fundamental changes have also occurred. Why has the time scale for the publication of a strategy been extended to 18 months? Surely the Government have had long enough—I mentioned the process earlier—to implement the strategy. Why can the strategy not be published in one year rather than 18 months? It is up to the Government to explain why a longer period is needed.

The definition of "micro-generation" in clause 129 applied to the generation of energy by means of equipment installed in or for use by a single unit or a small number of units of office or residential accommodation. To judge by the comments already made today, it seems that such a provision is basically welcomed and encouraged. The new definition in new clause 4 relies on the definition of specific sources or technologies of a set capacity, as set out in subsections (7) and (8).

Such an approach is much wider, and it might apply, or come to apply, to units of office or residential accommodation that are well above the size envisaged in the original clause. Is that a deliberate or accidental move? The Government have changed so much of the Bill that it would not surprise me if they wanted to make further changes. Either way, is the consequence that might flow from that approach desirable?

My hon. Friend the Member for Tewkesbury (Mr. Robertson) and the hon. Member for Milton Keynes, North-East (Brian White) touched on targets. All of us in Committee, excluding, of course, the Minister and his loyal Parliamentary Private Secretary—and perhaps the hon. Member for Milton Keynes, North-East, who might want to be a PPS one day—felt that we should have targets and milestones through which we can measure how we are getting on. I understand the Government's worry. The House will remember that, when they took office, they produced targets as if they were going out of style. There were targets for this, that and the other; indeed, every single Department had them. Most were missed, leading to subsequent embarrassment, so I can understand why the Government are running away from the idea of ever having a target again.

I shall not transgress into the territory of the short debate that will take place on new clause 5 and security of supply, but if we do not get that issue right, we could face blackouts or brownouts. My hon. Friend the Member for Salisbury (Mr. Key) said that we have got to get together and look at all possible sources of energy, so that we can supply the needs of this nation and he is absolutely right. I hesitate to say that I am as enthusiastic a supporter of nuclear energy as he is—I am more of a political coward than him. He is bigger than me, so he can batter his way through; I might get bounced around a little. That said, I am with him, in that this Government are displaying enormous cowardice by not coming forward with a nuclear strategy.

As night follows day, I cannot see how this country can get by and meet its energy demands without having a nuclear strategy at some point. I wish that we did not need one, but the reality is that we do. If someone asked me whether I would rather have a power station belching out smoke or a nuclear power station, I know which I would choose and I know which is more detrimental to our health. Some of the environmental groups that have been mentioned are being less than honest in their proposals. They simply are not recognising the realities.

I want to finish by touching on combined heat and power plants, which have already been mentioned. As this House learned when the Utilities Act 2000 went through, for some reason, the exports of electricity from CHP plants were included in the renewables obligation structure. I do not know whether that was deliberate or an oversight, but it has had a hugely detrimental effect on CHP plants. In effect, one low-carbon technology—CHP—is facing an additional cost burden to support another low-carbon technology, which is predominantly wind power. As we all know, an amendment was introduced in the House of Lords that the Minister then wiped out with a cavalier flick of his hand in Committee. As a result, we are now without any form of support for CHP.

The CHP industry has advised the Government that, in the past couple of years, we have fallen some 2,000 MWe short of the target of 10,000 MWe. The Government do not want targets, and if such shortfalls are going to happen in other fields of energy generation, I can understand why, because they would be hugely embarrassing. We are talking about a 20 per cent. drop compared with the original figure. That decline has led to an extremely difficult period for the industry. Even the DTI's own statistics show that CHP capacity and output have fallen.

I shall not go through all the reasons why CHP is a good thing, because other Members have done so. The Government's own drive to install CHP has stalled, and action is needed now to rebuild confidence and to get things going again. I welcome new clause 4 and the consequences flowing from it, but I am sorry to learn that the Minister is running away from targets. We need targets to know where we are and to measure what we have to do if we do not meet them. When the right hon. Member for Cunninghame, North (Mr. Wilson) was a Minister, he was an enthusiastic advocate of a target of 10 per cent. renewables by 2010, but he always fell a little short in terms of how that would be achieved. We have taken a small step—and I mean a small one—towards achieving that target, but I am desperately worried that there will be a shortfall. I do not want the people of this country to experience blackouts or to run short of power. It is up to the Government to ensure that they have targets, so that we know where we are, where we are going and what we need to put right.

Joan Walley (Labour, Stoke-on-Trent North)

It is always a pleasure to follow the hon. Member for South-West Hertfordshire (Mr. Page). He and I go back a long way, but I should point out that I do not share his conviction concerning a nuclear future. I want the Government to do everything that they can with renewables and energy efficiency, so that we can get to where we need to be. The Bill, and the new clauses and amendments that we are discussing, which were quite controversial in Committee, are all about security of supply. We must take the right action now to get us to where we need to be. We must avoid going down the nuclear route, and ensure that we have what we need when we need it.

The amendments and new clauses before us deal with perhaps the most complex and central issue of our time: how to provide the energy that we need. As was pointed out, there was a rebellion in Committee—we do not want another one this afternoon—but the Minister has listened to many of the arguments. It has been pointed out that the debate seems now to be about semantics rather than anything else; I hope that that is so, and that we are showing that this is an ongoing issue and campaign. We need to get the legislation right. We need to provide the tools to achieve the necessary investment in renewables, so that we get the energy policy that we actually need.

The debates in Committee centred on two main themes: residential energy efficiency, and the power of the regulator. The Government rejected a residential energy efficiency target, clause 3 was withdrawn, and there was a vote on clause 81. Many of us felt that that was a way of dealing with an issue that should have been dealt with in a more up-front way through clause 3. The most important point is that it is possible that existing carbon savings are simply not being counted. There was a great deal of frustration among many members of the Committee, including hon. Friends who are far more conversant with these issues than me, that the carbon savings had not been properly counted. In Committee it seemed wrong to go for a lesser target than that which we already had.

That is why I support my hon. Friend the Member for Milton Keynes, North-East (Brian White) as he continues to try to drive the agenda forward. He has tabled new clause 6, which deals with a policy goal. I do not mind whether something is a "target" or a "policy goal", but I do mind that we should have a Minister who aspires to make the carbon savings that we really need.

Mention has already been made of evidence given to the Environmental Audit Committee. We heard, for example, from the Energy Saving Trust and it is clear from its evidence that savings have been made, but are simply not being counted. There may be a role for the Sustainable Development Commission working with officials from the Department of Trade and Industry and, by that means, we could reach the stage that we should have reached in respect of energy efficiency. I believe that 5 megaton of carbon savings is absolutely on the cards, and we could achieve it quickly. I hope that in further discussions in the other place and in the Minister's ongoing policy work—I do not mean only when he speaks on the "Today" programme, defending his policy so admirably at whatever time in the morning—the necessary action will be taken forward. We want the Minister to make the carbon savings that we absolutely need and ensure the security of energy supply that we also absolutely need.

The role of the regulator is important. New people are responsible for the regulator's work and we may never go back to the days of Clare Spottiswoode, when we were categorically told that there was no way that environmental sustainability issues could be taken into account. It may not be necessary to have everything built into the legislation, and I hope that the Minister can provide us with an assurance that a change of direction has already taken place. The Sustainable Development Commission, under the chairmanship of Jonathon Porritt, could be more actively involved in ensuring that the regulators are conversant with the way in which the new duties have been spelled out in respect of the Government's and the Minister's long-term objectives.

The Deputy Prime Minister made a statement earlier today in which he referred to the new programme of house building across the country, which I believe that hon. Members on both sides of the House support. The extent of new house building and modernisation and investment in our existing housing stock will make it more important than ever that we have joined-up thinking across government. We need to ensure that we consider the impact of the energy systems in new residential properties, which could be significant in terms of carbon emissions. We need to promote joined-up thinking through the Green Ministers Sub-Committee and we need much tighter regulations from the Office of the Deputy Prime Minister on energy efficiency. We might then be able to start to deliver some of the policy goals set out in the new clause proposed by my hon. Friend the Member for Milton Keynes, North-East.

I believe that the Government have an opportunity to drive this agenda further forward. The thrust of legislation on energy efficiency and renewables is right. I welcome the provisions on microgeneration, which will also help. The day-to-day implementation will be crucial and the devil will be in the detail of how we get to where we want to be in respect of averting global warming and meeting the Government's Kyoto commitments. The Prime Minister has pledged himself to meeting them and will speak at the G8 talks next year. I hope that our consensual debate means that progress will be made on those most important issues.

Michael Weir (Scottish National Party, Angus)

I shall be brief in the vain hope that we might reach the last set of amendments in due course, but I should like to make a few points about this important group of amending provisions. I support new clause 6 and new clause 19—despite its proprietorial implications, as pointed out by the hon. Member for Lewes (Norman Baker).

New clause 19 is, in fact, supported not only by Friends of the Earth, which the hon. Member for Salisbury (Mr. Key) mentioned, but by the National Farmers Union, Slough Heat and Power, the Renewable Power Association and many others. They all support it because it deals with an issue that is vital to rural as well as urban areas. The renewable heat obligation provides the opportunity for biomass to contribute to our energy mix, which could be important for our farming communities as they look for new work to replace traditional work whose economic importance is not as great as it used to be. It also provides an opportunity for the forestry industry in Scotland, for example, to have an outlet for much of its produce.

I have already said that I support Government new clause 4, though I am slightly disappointed that its terms have been watered down. We debated an earlier draft in Committee, and I prefer the original wording. Microgeneration could be important in rural areas of Scotland where there is considerable interest in it, particularly on the part of those who have very expensive oil-fired central heating. Microgeneration provides an opportunity for replacing that fuel with a renewable source of energy, which would help many of our rural areas. It will become a very popular option if clauses 176 and 177 are passed in their present form and it will impact on many areas of Scotland.

I want to deal briefly with the regulator, particularly Ofgem, which the hon. Members for Milton Keynes, North-East (Brian White) and for Brighton, Kemptown (Dr. Turner) mentioned. I strongly agree that some guidance should be given to the regulator about how best to interact with Government policy, although I do not share the view expressed about the supposed improvement in Ofgem. My hon. Friend the Member for Banff and Buchan (Mr. Salmond) and I met representatives of Ofgem yesterday and, frankly, I was shocked at the fact that they did not seem to take any cognisance whatever of Government policy on renewable energy. Ofgem's entire raison d' être seemed to be to deal with markets and with what it saw as consumer protection. It did not take into account anything to do with renewable energy. In its calculations it did not seem to take into account what the Government are trying to achieve—an increasing element of renewable energy in our energy mix, which we all support.

That is a serious defect. By passing the Bill in its present form without addressing that problem, we are in danger of making it worse. We are all going forward together, across parties even, towards a renewable future, yet we may find it being sabotaged by the regulator, which is operating on an entirely different agenda. That is a serious matter, which the Government need to address. If they do not, the renewable future may go down the tubes very quickly.

Colin Challen (Labour, Morley and Rothwell)

I am pleased to say that through the Bill, the Government seek to deliver power to the people. I always knew they would. New clause 4 puts that into practice. Microgeneration will give people at a local level or an individual level a high degree of control over their sources of energy supply. It is good not to be dependent on a supply industry that has under-invested. The grid, allegedly, is on its last pylons, if not its last legs. We are told continually that power stations do not have the necessary capacity and that we may face another winter blackout crisis. We do not want a Californian situation in this country. That points to one good reason why we should give more control over these matters to people in their communities, just as is beginning to happen in Germany.

The hon. Member for South-West Hertfordshire (Mr. Page) asked why the period of consultation should last 18 months. He was given a good response to that from my right hon. Friend the Member for Cunninghame, North (Mr. Wilson) and my hon. Friend the Member for Stoke-on-Trent, North (Ms Walley), who said that there are clear issues that the Office of the Deputy Prime Minister must grapple with. There are also issues that the Department for Environment, Food and Rural Affairs must address. I urge my hon. Friend the Minister to ensure that the consultation that flows from the clause is extremely thorough and that it is carried out in partnership with those two Departments, so that the impact of the clause on the announcements that we heard today from the Deputy Prime Minister is taken on board by the Office of the Deputy Prime Minister.

I am concerned that that may not be the case. There is a great enthusiasm to build as many houses as we can get for the price that we are prepared to set. We should examine ways of funding environmental improvements. The Barker review suggested a windfall tax on sales of land for housing, which is not a bad idea. We might also consider a windfall tax on the profits of house builders, and we could Government hypothecate those amounts to improving the environment. I hope that the consultation that flows from the new clause will examine such proposals.

Microgeneration offers a great opportunity for the Department of Trade and Industry to show that the United Kingdom plc has a new manufacturing base and a new manufacturing strategy. If we get that right, there will be enormous markets—for example, in the developing world, where small and remote communities would benefit enormously from cheaper solar power. There are, of course, many different ways of trapping solar energy. If we can develop it in this country, we will have a potential export industry of a high order. That would help our manufacturing plant.

The week before last, with other members of the Environmental Audit Committee, I visited Aberdeen, which is known as an energy town, second only to Houston. People in the oil and engineering industries there are looking for new ways of developing what they see as a declining industry. When we discuss new alternative technologies, it is important that we recognise that we are not necessarily against those in the existing energy and engineering industries—we could work with them.

I thoroughly support new clause 6. It represents the other side of the coin to the sentiment about power to the people. If people can generate their own power through microgeneration, it makes sense that they should not have to generate so much energy. Energy efficiency, the other side of the coin, is known as the fifth fuel. I am a little perturbed by the reduction of the target from 5 to 4.2 megatons.

In that context, my hon. Friend the Member for Milton Keynes, North-East (Brian White) referred to a memorandum and evidence to the Environmental Audit Committee from the Energy Saving Trust. On the same day, 24 May, we also had before us representatives of the Carbon Trust, which was set up a few years earlier. It deals with the industrial and commercial side of energy saving, whereas the Energy Saving Trust is more concerned with the domestic side.

I was interested to note that the Carbon Trust said that the energy efficiency implementation plan would leave

"a gap to 2010 of around 4m tonnes of CO 2 assuming the 20 per cent. goal is applied specifically to the business and public sectors. Clearly, this gap could still be closed by ramping-up existing measures and introducing new ones. This should be a key issue for the review of the CCP later this year."

I hope that that approach also applies to domestic energy efficiency. Both the trusts to which I have referred believe that a lot more could be done, but they would say that, wouldn't they? However, I tend to agree with them—a lot more could be done.

We heard in Committee that the shortfall on the domestic energy front could be made up, and exceeded, in the commercial and industrial sectors. If so, I do not see why the same approach cannot be adopted for domestic energy. Why does one sector have to be downgraded, and the other upgraded? Industry and commerce obviously contribute a great deal in terms of carbon emissions, but the many hon. Members in receipt of this week's report from the Confederation of British Industry will know that that body is worried that environmental measures could make business uncompetitive. That is a very valid concern.

The very noble cause of reducing fuel poverty is at the centre of Government strategy. The DEFRA chapter of the 2004 spending review talks about the environment, and shows that it is fuel poverty that drives the policy on energy efficiency in the domestic market. That is very worthwhile, but what happens when everyone is released from fuel poverty? Will there be an end to grants for insulation, the Warm Front programme, and the rest of it? Clearly, there needs to be a greater emphasis on environmental need. We should not concentrate solely on fuel poverty.

I shall end with a brief comment in support of amendment No. 20. The EAC heard from the UK World Business Council for Sustainable Development that it was in favour of inserting a tighter requirement on the regulator. It wanted to use the phrase "sustainable development", and I noted that my hon. Friend the Member for Brighton, Kemptown (Dr. Turner) spoke earlier about "renewable energy". Those may be narrow definitions, but any reference merely to "the environment" can mean so many different things that it could mean nothing at all. I hope that the Government will listen to the intent behind the amendment, and act on it in some way.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

The hon. Member for Morley and Rothwell (Mr. Challen) will be very popular in Aberdeen city. He recognised that it is an energy city, and not just an oil and gas city. Aberdeen has been trying to rebrand itself and move away from the traditional industries that grew up there because of the resources in the North sea. As the hon. Gentleman said, the aim is to get the skills available in the energy industry transferred into the new and growing renewables sector, and to build a manufacturing base that will support that sector.

I want to speak in support of new clause 19. I shall be brief: the final group of amendments to be considered today also significantly affects Scotland, and I want to make sure that there is time to discuss those proposals.

In his introductory remarks, the Minister mentioned the Government's clear skies initiative. I wrote to the Secretary of State to pass on concerns expressed by a constituent of mine about the problems of accreditation for that scheme. That letter was passed to the Minister by the Secretary of State, so I hope that he will make sure that the problems are dealt with.

New clause 19 is important to my constituency. I represent a large, rural area, in which few communities are on the gas main. The heating alternatives for domestic dwellings and businesses rely on carbon-emitting fuels such as oil, coal and liquefied petroleum gas. The Government should welcome any move to replace those direct heat sources with renewable sources as a way to achieve their Kyoto commitments, and to reduce this country's carbon emissions.

In my constituency, one possible renewable source of heat comes from the rural community—the farming industry or, as the hon. Member for Angus (Mr. Weir) said, the forestry industry. Managed forests lock up carbon during the growing cycle, which is then used as fuel during the harvesting cycle. The process then repeats itself over the generations. However, many of our forests are reaching a point of maturity where they desperately need to be thinned. The problem is that there is no economic outlet for the wood taken during thinning. If we do not thin the forests now, we will not be thanked by later generations, as the forests that we leave to them for harvesting will be of much lower quality. Any measure that underpins the market for thinnings will help to boost the forestry industry. Obviously, those thinnings could be an ideal fuel for a biomass plant providing heating for a district or for industry.

Aberdeenshire council has been working hard to promote in the community the use of biomass as a renewable fuel and has come up against the argument from potential users that a renewable obligation might well be the tipping point that would make them take up that energy. It is important for the Minister to say how he plans to take forward what is in new clause 19, which seems to be the best way to encourage that form of substitution of carbon and advance that policy. District heating schemes are being considered for communities. As other hon. Members have said, the technology exists to use the fuel; it is not an unproven technology. It is simply a question of stacking up the economics properly. A level playing field needs to be created with other forms of renewable energy. If the fuel is used to generate electricity, it gets some element of renewable recognition, but where it is used just to produce heat there is no recognition of the valuable contribution that it can make to reducing our carbon dioxide emissions.

Stephen Timms (Labour, East Ham)

We have had a good debate on this series of amendments and new clauses. I welcome the support expressed for new clause 4 by a number of hon. Members, including my predecessor, my right hon. Friend the Member for Cunninghame, North (Mr. Wilson), who made an important point about addressing planning issues for microgeneration within the strategy. He will know that the updated renewables planning policy statement, PPS22, is due to be published by my right hon. Friend the Deputy Prime Minister shortly, but microgeneration will raise some new planning issues that we will need to consider in the context of that work.

Brian Wilson (Labour, Cunninghame North)

I am grateful for my hon. Friend's comments. Does he think that it will be possible within the time scale to incorporate the microgeneration issues into the report from the ODPM? I am slightly alarmed at the thought that it will take 18 months to get around to those issues. Surely if there is a sense of national urgency about all this, we could make rapid progress on microgeneration planning issues as well as on those that are more familiar.

Stephen Timms (Labour, East Ham)

I cannot give my right hon. Friend an assurance that those issues will be fully addressed in the imminent document from the Deputy Prime Minister, but he is right to say that we will need to address them in the context of the strategy. If we can make progress more quickly on that part of the work, we will certainly do so. I take on board his point about the urgency of making headway.

New clauses 2, 3 and 6 relate to energy efficiency. I recognise that there has been some disappointment that the Government's published aim of delivering annual savings of 4.2 million tonnes of carbon from households by 2010 is at the low end of what was indicated in the White Paper. I use that form of words because it has been said that the target has been reduced, and that is not the case. There was no target in the White Paper, but an indication that we thought that around 5 million tonnes—that was the expression used—of carbon could be saved from households. As I said in Committee, in my book "around five" means somewhere between four and six and the figure has come out at 4.2. The overall saving from energy efficiency was set out in the White Paper as 10 million tonnes—5 million from households and 5 million from industry. We are confident that we can deliver 12 million tonnes, with a substantially greater contribution from industry and 4.2 million tonnes from households. I have had the opportunity to meet the Association for the Conservation of Energy to discuss the issues, as I said in Committee that I would.

I cannot recognise the point that my hon. Friend the Member for Milton Keynes, North-East (Brian White) made about the crisis of confidence in the industry. We propose a doubling of the market for domestic insulation—cavity wall insulation. That is a huge boost to the industry; it can plan with great confidence for a big expansion. I accept that it is not quite such an enormous expansion as might once have been thought, but it is big, and the industry can be confident about its prospects.

We will review our energy efficiency aims in the household sector both, as my hon. Friend the Member for Morley and Rothwell (Mr. Challen) said, through the review of the climate change programme commencing later this year and through the 2007 review of the aim that was announced in the action plan. We will also look to maximise the cost-effective contribution from energy efficiency. I agree with my hon. Friend the Member for Milton Keynes, North-East who expressed the hope that we can go further than we have committed ourselves to doing at this stage. However, until those reviews take place, it would not be right to change the present aims.

Anne McIntosh (Conservative, Vale of York)

Does the Minister accept that the residential efficiency aims were changed not by his Department but by the Department for Environment, Food and Rural Affairs in the energy efficiency implementation plan? I do not know whether the two Departments have some history on that issue that the Minister might like to share with us. When does he intend to introduce the statutory requirement in the commercial sector?

Stephen Timms (Labour, East Ham)

The hon. Lady is right to say that DEFRA takes the lead on energy efficiency. However, as I am sure she has noticed, the two Departments work closely, and there is no difference between us on the issue. I do not agree that the figure of 4.2 tonnes is a change from "around 5 tonnes". It is simply a clarification of what the White Paper said.

The hon. Member for Lewes (Norman Baker) made a point about the importance of consumer behaviour, and I agree. We are working through the Energy Saving Trust to address the question of consumer behaviour. With marketing and communication specialists, we are considering how to take forward a new climate communications programme to draw to people's attention how significant a contribution they can make to achieving the objectives that are important to all of us. Our aims are challenging and will require concerted effort from all involved, and if we can increase them at a later stage, we will use our planned reviews to do so.

I wish to make the point to the hon. Member for Lewes that the Government remain firmly committed to our domestic target of a 20 per cent. reduction in carbon dioxide emissions by 2010. He suggested that that was not the case, but it certainly is. Clause 82 already imposes a requirement to report on "things done" for the purpose of achieving the energy efficiency aims designated under the Sustainable Energy Act 2003. That removes the need to have a separate report, as the amendment suggests.

New clause 19 addresses the issue of a renewable heat obligation, and we have had some interesting discussion of that point. It is an interesting idea and an important issue that we also discussed in Committee. Introducing such a measure, even in the permissive way in which new clause 19 is helpfully drafted, would be rash, given the little time that we have had to give it the serious consideration it deserves. We first need to do some serious analytical work, and we will. I shall meet representatives of several interested parties, including Friends of the Earth, which has rightly been mentioned, to hear how their ideas for renewable heat are evolving.

An obligation approach, as proposed by the hon. Member for Hazel Grove (Mr. Stunell)—I am pleased to see that he is in his place—may prove to be the best way forward. The Royal Commission on Environmental Pollution has referred to that approach, but other options need to be examined, too. We would need to examine the costs of a support scheme to the consumer and the impact on other policies to tackle fuel poverty. If we excluded the domestic sector from such a scheme, we would need to consider the administrative costs and whether they would be justified for the limited market that would be left. We would need to consider whether such a scheme would represent good value in terms of the carbon savings; the implications for the heating fuel supply industry; and whether the obligation should be placed on those who sell heat or those who supply fossil fuels for heating. All those issues can be resolved.

The question of renewable heat was also raised last month by the European Commission in its communication to the Council and the European Parliament on the share of renewable energy in the EU. The Commission noted that there is no legislation in place at European level to address renewable heat production at present, and that renewable energy in heating has grown slowly over the last seven years. The Commission has yet to come up with proposals on how that issue can best be tackled.

I very much welcome the fact that we have held discussions and the wide support that has been expressed in the debate, and I am grateful to the hon. Gentleman for airing the matter again today.

Andrew Stunell (Liberal Democrat, Hazel Grove)

The Minister is expert in giving us calm, warming words on these matters but what is he actually planning to do? He has set out a list of questions that need to be answered, but what does he intend to do and when?

Stephen Timms (Labour, East Ham)

I shall attempt to calm and reassure the hon. Gentleman. We shall take forward the analytical work that is needed to address all the questions that I have raised. As I am sure he agrees, those questions are serious, and we need answers before we can make headway. In addition, I shall meet those, such as Friends of the Earth and others, who have drawn particular attention to the importance of the matter. I agree that it is important and that we need to make headway, but we also need to do more analytical work before we can determine precisely the right way forward, or indeed the time scale for making progress. I hope that the hon. Gentleman feels reassured on that point—as on many others—by my answer.

Robert Smith (Liberal Democrat, West Aberdeenshire and Kincardine)

Will the Minister give way?

Stephen Timms (Labour, East Ham)

I really need to make some headway, given the points that have been made, rightly, about other matters on our agenda this afternoon.

On new clauses 20 and 21, I realise the importance of addressing the current problems for combined heat and power, but we need to do so in a way that does not undermine other objectives. As we have said both in the House and in Committee, we must not undermine what we all want to achieve on renewables, and that would be the problem under the new clauses. It is not just I who says so: as I mentioned in Committee, I have received representations from the Renewable Power Association, the British Wind Energy Association and the Association of Electricity Producers expressing their concern. Centrica plans to invest £750 million in renewables projects and sees the proposals in the new clauses as

"undermining the ROC market which is still in its infancy".

I appreciate that new clause 21 would attempt to make up for the loss on the renewables side, but it would introduce a range of uncertainties that do not exist at present, and that would be unhelpful. There is a real danger of moving the goalposts, thereby undermining the confidence that is so essential for delivering what we want across the range, especially on renewables.

Laurence Robertson (Conservative, Tewkesbury)

As I acknowledged earlier, the Minister makes a good point when he suggests that the new clauses are somewhat less than perfect, but will he make some proposals about how we can encourage the CHP industry? Although it is not carbon-free, it is certainly more efficient than many other traditional forms of electricity generation.

Stephen Timms (Labour, East Ham)

I agree. Several of my hon. Friends have made the same points about the importance of CHP and its benefits, and the significantly greater potential of its contribution. We set the ambitious target of more than doubling the amount of installed CHP capacity by 2010. Currently, it looks as though we are heading for 8.5 GW capacity rather than the 10 GW that was our target, so I agree that we need to address the shortfall. However, we need to find ways of doing so that do not undermine other objectives so I am especially grateful to my hon. Friend the Member for Southampton, Test (Dr. Whitehead) for his interesting suggestion in Committee that a possible means of providing further support for CHP would be a mechanism that he described as being like a fixed-rate mortgage, whereby the Government would guarantee a certain level of spark spread for CHP. Spark spread, as the House will know, is the difference between the price paid for gas and the price obtained for electricity generated.

Yesterday, my hon. Friend my noble Friend Lord Whitty and I attended a meeting with representatives of the Combined Heat and Power Association and others from the industry, and we had a good discussion of my hon. Friend's idea.Of course, at this stage, we have not been able to undertake any analysis of the practical and cost implications, but those at yesterday's meeting, including the association, agreed that that very interesting idea might give us a way to increase the attractiveness of investing in CHP without putting at risk other energy policy objectives. So we will work with the industry to consider whether we could move in the direction suggested by my hon. Friend. We also need to work with the industry to consider other options in case that one does not work out in the way that is hoped, so that we can produce proposals in support of CHP that are demonstrated to be cost effective and that do not undermine other policy objectives. I hope that that dialogue will be fruitful. My hon. Friend made an appropriate point about the importance of our success.

My hon. Friend the Member for Brighton, Kemptown (Dr. Turner) spoke to amendment No. 20, and I am grateful to him for making a number of points, including his acknowledgement of some technical difficulties with the drafting. By deleting the current principal objective for Ofgem and putting in place a number of similarly weighted duties, the amendment would in practice make it very difficult for the regulator to work out how to prioritise its work and balance its duties. The current set of duties strikes a careful balance between a number of different objectives and was arrived at after much consideration and consultation. I certainly would not want to change those duties without, as a minimum, doing a similar amount of work and ensuring that there was a wide understanding and acceptance of the change that was being made. The current principal objective of

"protecting the interests of consumers"

is well understood and welcomed by all stakeholders, and we should not delete it.

In amendment No. 20, there is a particular difficulty with the phrase

"to ensure that there is no detriment to the promotion of".

The strength and inflexibility of that phrase could cause some difficulty in making our energy markets work for the good of consumers and UK competitiveness. However, I hear what hon. Members, including a number of my hon. Friends, have said about the importance of sustainable development to Ofgem's work. Of course, guidance is already in place. I welcome the fact that, for example, my hon. Friend recognises that Ofgem is now seen to deliver effectively on those priorities, but I have noted the strength of feeling that my hon. Friends have expressed on that point.

On the basis of the explanation and assurances that I have given, I hope that the House will feel able to agree to new clause 4 and the associated Government amendments and that hon. Members will not press to a vote the other amendments and new clauses in this group.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 5 — Annual report on security of energy supplies

Stephen Timms (Labour, East Ham)

I beg to move, That the clause be read a Second time.

Security of supply is vital to the UK—a key underpinning for our economy, and something that we all take for granted in our daily lives. Debates on the Bill both in the House and the other place have reflected the strength of feeling and concern on the issue among hon. Members of all parties. At the outset, I should like to thank the hon. Members for Tewkesbury (Mr. Robertson) and for Hazel Grove (Mr. Stunell) for their contributions to identifying what is now a broadly acceptable way forward to address security of supply in the Bill.

A provision agreed to on Report in the other place would have given the Secretary of State a broad duty to ensure the integrity and security of gas and electricity supplies. However, it was pointed out to us through numerous subsequent representations that it would unintentionally create great uncertainty in the market and undermine the independence of the regulator and incentives for investment. The provision was taken out of the Bill in Committee, but I undertook to think further about a proposal made by both Conservative and Liberal Democrat members of the Committee to require the Secretary of State to report annually to Parliament on security of supply. I said at the time that I thought that that was a helpful suggestion, so I am pleased to be moving a provision along those lines today, which I have been able to discuss with the hon. Members for Tewkesbury and for Hazel Grove. The new clause reflects the Secretary of State's ultimate responsibility for security of supply and her accountability to Parliament for its delivery.

New clause 5 will place a duty on the Secretary of State to publish an annual report. She will also be required to lay the report before Parliament, which will provide an opportunity for an annual debate in Parliament during which hon. Members may scrutinise her account. I hope that that opportunity will be taken up. The report will have to cover energy security in both the short and long term. I envisage that the short term will relate to the next year or so, and I would expect the long term to cover 10 years ahead, although certain aspects of the report will lend themselves to different time scales. For example, National Grid Transco currently forecasts plant margins seven years ahead in its seven-year statement, whereas the effects of the renewables obligation will extend well beyond 10 years. I do not think that we can put a firm figure on the time covered by "long term", but I hope that I have set out the sort of period that the report will cover.

Brian White (Labour, North East Milton Keynes)

It was said in Committee that security of supply was not only a supply-side, but a demand-side issue. Will the Minister assure me that that will be considered in any report? Will the term "reasonable demands" allow the consideration of demand-side issues that should be addressed?

Stephen Timms (Labour, East Ham)

Yes, account will have to be taken of those issues. As my hon. Friend will know, we will report separately on progress made on energy efficiency, but the report about which I am talking will certainly need to take account of future realistic levels of demand and the extent to which we can identify reductions to that as a result of headway made on energy efficiency. My hon. Friend makes a good point.

We have specified areas that the report must cover: the availability of electricity generating capacity, or the plant margin; the availability of gas infrastructure, which we have defined as including pipelines and terminals for importing liquefied natural gas; and the availability of electricity and gas networks to get supplies to consumers. Those factors are especially important, and they focus on electricity and gas infrastructure located in Great Britain, which reflects the fact that that is where the Secretary of State and Ofgem have direct responsibilities.

The list is not exhaustive, but subject to the more general requirement that the report must deal with

"the availability of gas and electricity for meeting the reasonable demands of customers in Great Britain".

We will have to consider wider issues such as the one to which my hon. Friend the Member for Milton Keynes, North-East (Brian White) referred. If the report were published now, for example, it would be appropriate for it to cover measures taken to liberalise energy markets in Europe and to agree international treaties for gas pipelines. Those issues will change over time, and it is thus right for the specific focus of the report to be the availability of electricity generating capacity, gas infrastructure, and electricity and gas networks.

There has been discussion of whether the report should also address the security of oil supplies. Oil security is firmly on the Government's agenda and we play a full part in the work of the International Energy Agency, including its emergency oil-stocking arrangements. The IEA is a centre of expertise for oil analysis and publishes regular analyses on the long-term availability of oil. However, I suggest that this report is not the best or most appropriate vehicle to deal specifically with those issues. Its focus on gas and electricity reflects the fact that those are both regulated areas in which the Secretary of State and Ofgem have important duties in relation to security of supply. The situation is rather different in respect of oil, which has an internationally competitive market.

The new clause also specifies that the report is to be prepared jointly by the Secretary of State and Ofgem, reflecting their complementary roles. Areas such as enforcement of licence conditions are properly delegated to the independent regulator, as the necessary expertise lies with Ofgem. Of course, the regular discussions that we have with industry at ministerial and official level about security of supply will also help to inform us as we draw together the report.

Martin O'Neill (Labour, Ochil)

My hon. Friend has just mentioned energy efficiency, but since the responsible Ministry is the Department for Environment, Food and Rural Affairs—at least, it has a substantial part of the responsibility—should it not be included in the Bill, and even if not, should not a nod be given in its direction to say that its information will be utilised as well?

Stephen Timms (Labour, East Ham)

I can certainly give my hon. Friend the reassurance that we will work with DEFRA and other Departments in compiling the report, but the legislation vests the legal obligations for ensuring security of supply in the Secretary of State and Ofgem. Hence, they have lead responsibility in preparing the report.

Bill Tynan (Labour, Hamilton South)

Will the report contain a plant margin percentage that would require to be met every year?

Stephen Timms (Labour, East Ham)

Yes, the report will specifically address the question of the plant margin.

The new clause represents an important step forward. It will enable Parliament, industry and the public to scrutinise the Secretary of State's assessment of the security of energy supplies in Great Britain and to call her to account. Again, I am grateful to Opposition Members for making this helpful suggestion and for the constructive way in which both they and the industry have helped in developing the proposal. I hope that the whole House will feel able to support the new clause.

Laurence Robertson (Conservative, Tewkesbury)

I thank the Minister for the generous and courteous way in which he has dealt with the new clause. He has certainly involved me at every stage, for which I am grateful to him. We have got to a position that is acceptable to hon. Members in all parts of the House, and that is very sensible.

I wish to go back a little bit in time and explain what the Lords—certainly the Conservative Lords—were thinking about when they proposed the original provision, which placed a duty or even burden on the Secretary of State in respect of the integrity and security of gas and electricity supplies. Of course, that provision came on the back of power cuts in California, New York, Italy and, more relevantly, London and the west midlands. Those problems arose for different reasons that were not necessarily related to the actual generation of electricity, but following those incidents, the BBC programme "If . . . the Lights Go Out" was broadcast. On that day, which was particularly cold, the national grid and Transco issued a warning of insufficient margin, as the margin fell to about 7 per cent. That is not necessarily a dangerously low position, but put together, all those factors had an effect and inspired those in another place to table an amendment to the Bill that placed responsibility for securing energy supply with the Secretary of State.

The issue also went wider. We now face a situation in which our indigenous gas and oil supplies are starting to decline; I shall not put it any stronger than that. There are a lot of environmental pressures on the coal industry from the large combustion plant directive and the emissions trading scheme. Rightly, we have our own targets for reducing emissions. Over the next 20 years, unless extensions and new build are embarked upon, the nuclear industry will decline from its present 22 per cent. of electricity generation to just 2 per cent. We all support renewables in terms of the practical challenge of building them and bringing them online, as well as in a philosophical sense, but there is a long way to go to make up the potential loss of the nuclear and coal generating industries.

The point that I am making, in a roundabout way, is that there is a question mark over the security of supply and our ability to generate sufficient electricity in the medium term. The medium term could be two, three, four or five years, or slightly longer—it is a moveable feast—but however we define it, the problem remains. It is not only Conservative Members who put forward that proposition—as the Minister and Liberal Democrat Members know, many industry commentators share our concern. They are worried that falling wholesale prices will make many investors nervous about investing in the generating business, given that they have to make money and can choose to invest anywhere.

That was the general background to the drawing up of the amendment that the Lords originally added to the Bill. The Minister is right to say that that was perhaps misinterpreted by the industry. People came to us and said, "You were the party which freed up the electricity industry in the first place—why are you supporting a clause that could reverse that?" Of course, it would not have had that effect, because it gave the Secretary of State no more power than he—or she, in this case—already had. There was alarm, however, and the last thing that we wanted to do was to create any more uncertainty in the market. I readily agreed to discuss it with the Minister, and we have reached a sensible compromise whereby the Government will produce an annual report on the position with regard to gas and electricity over the short to medium term.

I entirely accept the Minister's explanation as to why the report will not deal with oil, because that situation differs in many respects. However, it is serious and needs addressing. We all remember the difficulties in the early 1970s following the huge hike in oil prices, and we have all endured the recent scare over the security of oil supplies, not to mention price. But I digress slightly.

The Minister said that the report could provide the opportunity for a debate in the House. That is important, because I would not like the report to be hardly seen, heard about or debated. People like me can come to the Dispatch Box and ask for a debate, but if the Government are not willing to provide the time, it will not happen. Will the Minister confirm that he intends the report to be debated in Parliament every year? If he can give that assurance in clear, unequivocal terms, I see no reason why we should not support the new clause.

Martin O'Neill (Labour, Ochil)

I agree with the hon. Member for Tewkesbury (Mr. Robertson) that such a debate should take place in Government time. We hold several debates on, for example, the armed services. The issue that we are considering is also a matter of life and death. Perhaps it is not as dramatic as some other subjects but it is as important. The Government new clause constitutes a good compromise.

When the relevant amendment came from the Lords, I thought that there was a wee bit of mischief making and opportunism, but that is the function of the Opposition and we cannot complain about it. However, it was always acknowledged that, regardless of who owns oil, gas and electricity utilities and generating capacities, if the lights go out, the Government get the blame. A more formal structure is therefore welcome. We used to have documents, such as the brown book on the North sea, which continue to be published; but something that is more pointed and better focused will assist.

We must try to hold a more mature and better informed debate on issues such as security of supply. We wasted a lot of time considering whether the American experience was relevant and whether that on the east coast or the west coast applied more to the British position. We also examined whether it was appropriate to take account of what happened in Italy or, indeed, in London and Birmingham. When the Select Committee considered the matter, it became clear that events in London and, to a lesser extent, Birmingham were probably accidental. However, they were wake-up calls that conveyed a warning that we cannot afford to be complacent about the organisation of maintenance—that was the difficulty in London—or taking off supply specific power stations that have not been called in for many years. That was the case with the Lotts Road facility. [Interruption.] We had a problem with a fly, but I think it has been sent away.

My hon. Friend the Member for Hamilton, South (Mr. Tynan) made the point that margins should be considered seriously because they are important. There has been a debate about whether some sort of payment should be made to companies for keeping plant available. The increase in electricity prices, at least in the short term, may have resolved that matter, because it is now worth a company's while to keep its reserve stations ticking over so that they could be used.

More attention should be paid to gas supply and storage. We have long established a number of days' supply of oil and, in the past, we had coal reserves in power stations. The demise of the coal industry has meant that such precautions no longer form part of the physical landscape of Britain. The power stations that I pass have nothing like the supplies of coal that they used to hold. Before long, we must not only pay more attention to the provision of reservoirs and undersea salt caves, which will doubtless be used for storing gas, but we should have proper accounting of the number of days' supply, especially as dependence on gas increases.

In Britain, we have been incredibly fortunate for many years in being self-sufficient in energy. In transport, we have had a bit of elbow room for essential services. However, we could find ourselves in the position of being no different from many other countries in our dependence on imported gas, while having nothing like the provision for emergencies that they have had to adopt as a matter of course over a number of years. That is an area of adjustment that we have not fully addressed. We are getting supplies through the deal that was struck with the Norwegians last year, in which my right hon. Friend the Member for Cunninghame, North (Mr. Wilson) played an important role, but we need to ensure that if there are to be interruptions, there will still be a sufficiency of supply necessary to deal with them.

It has been pointed out that pipelines and interconnections are outwith British shores. They are significant, however, and I should like to think that they would be included in the proposed annual report. My hon. Friend the Member for Hamilton, South mentioned the question of margins, but we also need to address the issue of the predicted lifetime of a number of the major generating facilities, so that we can see which will be coming off supply and which will be remaining. That would be of assistance to our debate. It would also strengthen the hand of Ministers wishing to encourage investment programmes in particular ways or areas, seeking to persuade the Chancellor that a more sympathetic fiscal regime might be necessary, or assisting a regulator to change the nature of pricing to make it more attractive to undertake investment of this kind over a period of years.

The new clause is an extremely worthwhile attempt by the Government to bridge the gap that existed between themselves and the Opposition parties in the Lords. It is essential, however, that proper weight be given to the request that the debate on the annual report should be held in Government time. It will involve the Government's report and the Government will be held to account here. It is therefore appropriate that they should make the time available to the House for the debate. I appreciate that the Minister might have difficulty in doing that, but he ought to recognise that the significance of this report should be no less than that of a Defence White Paper, for which we offer a number of days of parliamentary time. I realise that the Whips' Office and the Leader of the House are not always the most flexible institutions in this place. I have never found them, after years of Labour and Conservative Governments, to be very flexible or enlightened, but perhaps the strength of this argument, and of the advocacy of my hon. Friend the Minister, is such that he will be able to ensure that those sometimes immovable objects can be shifted a little so that time can be made available for an increasingly important debate that would attract attention from both sides of the House.

Andrew Stunell (Liberal Democrat, Hazel Grove)

The Liberal Democrats will support new clause 5. I certainly do not recognise the description of the hon. Member for Ochil (Mr. O'Neill) of the provisions as mischief-making by the Lords. It is a fundamental part of the Bill that some attempt should be made to set out a strategy for this country's energy supply, and I believe that such an attempt has been made, with the support of Conservative and Liberal Democrat Members in the other place. I want to acknowledge my opposite number at the other end of the building, Lord Ezra, who worked exceptionally hard on this and other aspects of the Bill.

I am very pleased that the Government have agreed that a modified version of those proposals should go into the Bill and that they have produced this new clause. They have understood that the Secretary of State would have an inescapable obligation to give an account of themselves and their Government, if the moment came when the lights went out. For them to have a rain check every year, with an annual report coming to the House, is therefore an important way of guarding against that eventuality and of protecting themselves against that nasty, unpleasant surprise, should it happen.

I hope that the Minister will pick up the case made by the hon. Member for Milton Keynes, North-East (Brian White) who, as so often in these energy debates, made a very useful point. He said that it is not just a question of pushing stuff into the system, but of sucking stuff out of it. It is one thing to control the taps that run into the bath, but we must also make sure that the plug is in the bath and that we do not waste the energy that we have. I hope that he will acknowledge that we need to consider efficiency of use and energy conservation as part of that annual reporting and planning process. Perhaps he will reflect on the fact that, while those two important functions are split between two different Departments, there is an inherent risk of things falling through the gaps. This process could be a way of making sure that that gap is closed and that Government policies are coherent and joined together.

The Minister had a number of things to say about defining what "long-term" and "short-term" meant. I was interested to hear what he said, not least because I had alerted him to the fact that I would be on my guard to see that "long-term" covered the full range of options. I remind him and the House that we are talking about an industry that, over the next 40 years, will have to renew every part of its infrastructure—all the generating capacity currently in existence will need to be replaced, along with all the transmission equipment, and for that matter, all the equipment in our homes and in industry that consumes the energy. There will be a complete turnover of infrastructure. One of the most fundamental questions for the Government in developing their energy policy is whether to be proactive or to let a like-for-like replacement policy dominate, without taking advantage of the technological and market changes that are available.

I therefore hope that the Minister will confirm that "long-term" will be as long as it needs to be and, if we are considering the overall patterns of generation, transmission and consumption, that the longer view will be taken into account and factored in. The decisions taken in the short or medium term will determine whether we can reach the long-term solutions that I believe that he wants. Certainly, the White Paper said that the Government wanted such solutions, but they cannot be achieved simply by leaving matters to chance.

We will support the new clause, which is a very important part of the Bill. It is the nearest there is to a provision that considers an overall long-term strategy. From that point of view, it is the core of the Bill.

Bill Tynan (Labour, Hamilton South)

May I add my welcome for this vital new clause? It gives the Government and the Opposition an opportunity to examine annually how we maintain security of supply in this country. That will become an increasing problem over the next few years, with the phase-out of coal-fired power stations because of the European emissions targets and the situation in relation to nuclear power.

We must consider what the best source of energy for this country would be. I happen to believe that it would be nuclear rebuild. I know that that will not gain much support in the Chamber today. The hon. Member for South-West Hertfordshire (Mr. Page) referred to the Government's cowardice on energy supply. I would level that charge at the Opposition, who believe in a nuclear policy but have so far failed to demonstrate their support for it in the Chamber.

Laurence Robertson (Conservative, Tewkesbury)

May I read out part of a letter from my right hon. and learned Friend the Leader of the Opposition? In reply to a constituent about energy policy for the future he says:

"I can assure you that nuclear energy will be a vital part of this".

That is pretty clear.

Bill Tynan (Labour, Hamilton South)

I am delighted to be corrected and accept the evidence of that correspondence. Certainly, it helps me to feel a lot better, because it means that I am not alone in my support for nuclear energy.

Carbon dioxide emissions will be another major problem over the next few years. I asked the Secretary of State

"What estimate she has made of how much carbon would be emitted if all gas fired power stations that have been approved, but are yet to enter into service, entered service."

The Minister told me:

"There is currently around 4,800MW of gas-fired capacity comprising six large stations, approved but yet to enter into service."

That sends signals to me that there could be a move to a gas economy. The Minister also said:

"emissions from these stations would amount to around 3 million tonnes of carbon per annum."—[Official Report, 15 June 2004; Vol. 422, c. 814W.]

There is no such thing as a carbon dioxide emission from nuclear power.

I understand the waste problem, but that already exists, especially with military and civil waste. It must be dealt with and I am glad that the nuclear decommissioning authority is being set up to deal with it.

Other major issues are security of supply and global warming. It is said that either 20 or 40 per cent. of our energy must come from renewables. I welcome the news of a renewables obligation and of an increase in the use of renewables—although I believe that the Scottish environmental and culture committees said that there was a problem with wind power and that we should move towards tidal power. I am sure that that will be the subject of a future debate.

How can we ensure security of supply? If we intend to obtain 70 per cent. of our energy from gas—which would presumably feature in the report—and if it is to come from, say, Russia or the middle east, I do not think that we can guarantee secure supply. Given renewable power and a 20 or 40 per cent. target, and given all the measures relating to domestic heating referred to in new clause 4, security of supply will be the big issue in connection with gas coming into this country. I understand that we have kept the nuclear option open, but unless the Government make a decision on our new nuclear power build—perhaps we shall have to wait until the next general election for that—I do not believe that we can maintain security of supply.

I certainly do not believe that we can do that with wind power. I visited Dunlaw, a wind farm on the east coast of Scotland. It had 26 turbines with a capacity of 17.26 MW and on a windy day, it was producing 4 MW. That was the standard level. The problem with wind power is that it is an intermittent source of energy. I welcome the news that we are to use it, but without some back-up we shall have a problem. I understand that in 2015 Longannet power station will be phased out, not because of any problem with transmissions but because unless it changes to clean burn, European emissions arrangements will ensure that it disappears. Wind power is, however, the most flexible power source we have at present.

I welcome the idea of an annual report. It is an essential means of holding the Government to account and I am pleased that Government time will be available for the report to be discussed. It will be interesting to see what it contains and how secure supply will be. I believe that history will show that, unless we change the mix that we propose in the future, with the majority of energy coming from gas, we will fail the people of this country badly. To those who want no nuclear power, let me say that the people of this country will never forgive the Government if we lose power for a day, two days or three days. If that happens, people will not care which energy source the power to light their homes comes from. The report could be used as a serious measure in the development of power and security of supply.

Richard Page (Conservative, South West Hertfordshire)

As the House knows, clause 1 originally placed on the Secretary of State the duty

"to ensure the integrity and security of electricity and gas supply".

Placing that duty on the Secretary of State's shoulders was responsible and justifiable, but the hon. Member for Ochil (Mr. O'Neill) feels that it would be too much for any Secretary of State to bear. With a verbal flick of the hand, the Minister condemned the clause to oblivion with the same relaxed attitude as a Roman emperor would dispatch a group of Christians to the lions. That said, I am grateful for new clause 5. It is perfectly possible to accept the assurance from the Minister for Energy, E-Commerce and Postal Services in his famous letter of 28 June, which I like to quote, that the new clause is designed to

"emphasise the Secretary of State's responsibility for security of supply",

although "security of supply" and the Secretary of State's accountability to Parliament for its delivery are not mentioned. However, the new clause is obviously better than the vacuum in Committee, and I therefore welcome it.

I support the request from the hon. Member for Ochil for a debate in Government time. As a former Parliamentary Private Secretary to a previous Leader of the House, I know that the timetable is subject to competing pressures, and even the best intentions of Ministers as responsible and mature as the Minister for Energy, E-Commerce and Postal Services may get pushed to the back of the queue, so the debate should be set in tablets of stone.

I want to make three quick points. First, I endorse the remarks made by other hon. Members about the various time scales. I can see short-term and long-term strategies, but I cannot see a medium-term strategy, and I wonder why we do not have such a strategy on energy production—I do not know whether I am being pedantic or whether the point is relevant.

Secondly, I support the hon. Member for Hamilton, South (Mr. Tynan) on the importance of nuclear power. New clause 5(2)(a) states that an assessment must be made of the

"generating capacity in Great Britain",

and I hope that that includes an assessment of the generating capacity of nuclear power. I shall give a little encouragement to those faint hearts who do not believe that nuclear power has a significant role to play, by quoting last week's The Sunday Telegraph—it must be true—which states:

"In total, there are some 30 nuclear power stations currently under construction around the globe . . . Together they will generate 2610TWh of power without emitting greenhouse gases. Coal-powered stations generating the same amount of power would spew 2.4bn tonnes of carbon into the atmosphere every year."

If that saving is not significant, I do not know what is. I hope that the evaluation and monitoring of what is available from our nuclear industry is kept at the forefront, because as much as we all want renewables to win through and provide our energy, if the wind does not blow, it is difficult to obtain a satisfactory base load.

Thirdly, on annual reports, our energy requirements will increasingly be met from abroad. Our gas will come from further and further afield, and it will go through areas and regions that may not be stable. The annual report should look at security of supply of oil and gas from other countries to ensure that we do not get caught without any power. As has been said, if the lights go out, people will not say, "Oh, it is because of this or that." They will rightly look for someone to blame.

Having said all that, I welcome new clause 5, which helps to fill the vacuum that was created. I still think that the original phraseology was right, because it would have focused the Secretary of State's attention. Nevertheless, the Minister has taken such responsibility off the shoulders of a future Secretary of State and we now have a reasonable compromise.

Brian Wilson (Labour, Cunninghame North)

I was always surprised to discover how little impact the statistics on prospective gas use had on the public, or, indeed, on political opinion. It is a startling prospect that a country that has been a net exporter of energy since the beginning of the industrial revolution is about to become a net importer on an enormous scale. The course that we are following will mean that by 2020, we will be between 70 and 80 per cent. dependent on gas for our electricity, and 90 per cent. of that gas will be imported. Those are remarkable statistics and the very least that we should do is to monitor their credibility from year to year. I therefore welcome the new clause.

I am pro-nuclear and pro-renewables because I am pro-carbon reduction—it is as simple and straightforward as that. As the decade advances and global warming's profile rises as a political issue, so nuclear and renewables will be seen as two sides of the same coin. In the context of the new clause, the crucial question is: what are we doing to keep the nuclear option open? Contrary to the spin that was applied to the energy White Paper by some sources, it was not an anti-nuclear tract. It was very firm on the need to keep the nuclear option open, which means maintaining this country's existing nuclear skills, being full participants in international research into reactor design and doing everything else necessary to remain a credible force in the global nuclear industry.

One reason for keeping open the nuclear option and keeping up the skills base is that many parts of the world whose nuclear industries do not have the same technical qualities as ours look to the United Kingdom for support. We should not lightly throw away that pool of expertise. I therefore hope that the Minister can assure us that the yearly review will include an update on how we are doing in giving substance to the White Paper's commitment to keeping the nuclear option open. In my view and that of many others—including thinking environmentalists who are not bogged down in the anti-nuclear obsession—we are going to need the nuclear option. Describing the practical steps that we are taking to keep it open must therefore form part of any such review.

Stephen Timms (Labour, East Ham)

The latter part of the debate was particularly concerned with nuclear energy and as my right hon. Friend the Member for Cunninghame, North (Mr. Wilson) rightly pointed out, the energy White Paper made it clear that we want to keep the nuclear option open. However, we are not yet in a position to say whether we will need new nuclear power stations.

I listened with the interest to the exchange between my hon. Friend the Member for Hamilton, South (Mr. Tynan) and the hon. Member for Tewkesbury (Mr. Robertson) about the Opposition's policy on this issue. My hon. Friend was perhaps too optimistic about the hon. Gentleman's quotation from the letter from the Leader of the Opposition. Although the latter said in his letter that the Conservatives will have a policy on nuclear as part of their energy policy, it was not clear to me what that policy would be. Perhaps I missed something, but I did hear—

Bill Tynan (Labour, Hamilton South)

Perhaps I have more faith in the Opposition than my hon. Friend does.

Stephen Timms (Labour, East Ham)

On Second Reading, the hon. Member for Eddisbury (Mr. O'Brien) said:

"Let me say for the record that we have an open mind on the future of nuclear energy."—[Official Report, 10 May 2004; Vol. 421, c. 57.]

That sounds rather like the policy of keeping one's options open.

I welcome the support for the new clause. We have had a useful debate, which has highlighted some of the detailed issues that the proposed report will have to address.

As my hon. Friend the Member for Ochil (Mr. O'Neill) rightly said, we have arrangements for annual debates in Government time on matters such as defence. I have to say to the hon. Member for Tewkesbury, who fairly raised the matter with me earlier, that I have not yet had an opportunity to raise with the Leader of the House whether we could guarantee an annual debate. As a former Energy Minister himself, my right hon. Friend takes a close interest in these issues, so I am sure that he will be receptive to the suggestion. Fortified by the strong arguments made on both sides of the House in the debate today, I will certainly do all that I can to ensure that we do indeed have the annual debate that has been called for. I agree that it would be valuable and add to our confidence in taking these matters forward.

Laurence Robertson (Conservative, Tewkesbury)

I am concerned that the matter has not yet been raised with the Leader of the House. Will the Minister confirm that, in line with the new clause, it is the Government's intention to have the report debated in Government time every year? Is that the intention of this particular Minister?

Stephen Timms (Labour, East Ham)

It is certainly my intention, though I would not want to look too many years ahead. It is not, of course, in my gift to deliver that aim into the indefinite future. However, it is certainly my intention and I will do all that I can to ensure that we achieve it.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 7 — Imposition of renewable transport fuel obligations

Stephen Timms (Labour, East Ham)

I beg to move, That the clause be read a Second time.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this it will be convenient to discuss the following: Government new clause 8—Administrator.

Government new clause 9—Further provision relating to RTF orders.

Government new clause 10—Renewable transport fuel certificates.

Government new clause 11—Discharge of obligation by payment.

Government new clause 12—Imposition of civil penalties.

Government new clause 13—Objections to civil penalties.

Government new clause 14—Appeals against civil penalties.

Government new clause 15—Interpretation of Chapter 4 of Part 2.

Government amendments Nos. 18 and 19.

Stephen Timms (Labour, East Ham)

I think that everybody recognises that renewable transport fuels have an important part to play in our efforts to tackle climate change. In the short term, that means biofuels—we have already discussed biomass—but in the longer term it may well mean other fuels such as hydrogen produced from renewable electricity. We have already taken steps to promote the take-up of biofuels, including the 20p a litre duty incentive that the Chancellor has guaranteed for three years, but we also have to consider carefully options for the longer term and a form of renewable transport fuel obligation is a serious possibility.

An amendment for such an obligation was tabled in the other place at the beginning of the year. A lot of constructive discussion and debate took place and the outcome was a permissive clause in the Bill. I confirmed in Committee that we were content in principle with that clause, but that it needed further work on the wording to cover some of the practical issues. I tabled those Government amendments last week, and hon. Members will have noted that this has involved transforming one clause into nine, entirely replacing the current clause 125. That reflects some of the complications that had to be faced in retaining the principle behind the original clause, while ensuring that it was legally and practically robust. I believe that we have achieved that objective and I hope that the House will welcome the seriousness with which we have taken it forward.

The new clauses will allow the Government to require designated transport fuel suppliers to demonstrate that their total UK fuel sales in a given period included, in aggregate, a specified proportion of renewable transport fuels. That is broadly analagous to the current renewables obligation with which we are familiar. Renewable transport fuels would cover biofuels and other non-fossil fuels, such as renewably produced hydrogen.

The detail may seem extensive, but we need to allow flexibility in respect of how precisely a future obligation might operate and we need to consult extensively with industry and other interested parties on the scheme's final design. We have also had to deal with complications because we do not have an existing regulatory body to help run the scheme. A number of clauses relate to the appointment of an administrator, funding issues and a penalty and appeals regime.

In general, the drafting reflects electricity legislation on the renewables obligation. It allows for the issuing and trading of renewable transport fuel obligation certificates; provides a buy-out mechanism to add flexibility in meeting the obligation and to protect against unacceptably high costs to consumers; and makes different arrangements for different fuels based on their comparative benefits. We have not taken a final decision on precisely how a scheme might operate. A scheme that we chose to introduce might be a very simple one or a more complex one. All that would be a matter for detailed consultation.

Richard Page (Conservative, South West Hertfordshire)

I am intervening now because, in view of the time, I will not make a contribution. Will all the steps that the Minister is outlining allow biofuels to be produced in the United Kingdom, so that we do not create a regime whereby those come in from abroad? The biofuels manufacturers feel that the 20p support is not enough. It is satisfactory for processing chip oil and for rendering, but for other purposes it is not quite enough.

Stephen Timms (Labour, East Ham)

The obligation will be helpful in that respect. We need to build up a scale of demand for renewable fuels in the UK that would justify investment in the UK to provide the biomass that would allow the fuels to be produced. The obligation has the potential to deliver that. The detail will need to be decided as a result of consultation, and the issues relating to benefit to the UK economy will need to be addressed.

The clauses allow for the appointment and funding of an administrator, an appropriate penalty and appeals regime, and requiring fuel suppliers to provide information in connection with the obligation. I hope the House will agree that the clauses fully reflect and build on the principle of the amendment tabled earlier in the year. There has been a good deal of constructive debate on the matter, and I believe the end result is a testament to that. I commend the clauses to the House.

Laurence Robertson (Conservative, Tewkesbury)

As the Minister says, this group of new clauses is a response to pressure put on the Government in another place over the introduction of a renewable transport fuel obligation. It is also a response to the requirements of the EU biofuels directive, which requires the Government to demonstrate how they will increase the use of biofuels.

Given that requirement, it is a little surprising that the Government's new clause only gives the Secretary of State the power to introduce an obligation. It does not require the Secretary of State to introduce that obligation. It would be interesting to have on record the Government's plans in this respect. How do they intend to fulfil the requirements of the directive? Will they indeed introduce the obligation?

As with the process of generating electricity, there is a need to cut carbon emissions from transport, which are significantly high, as well as to move towards a position of security of supply of fuel for transport. As we have already discussed, we remember the problems that an over-dependence on oil brought to this country and others.

The use of sustainable primary sources of fuel might have the added benefit of assisting our farmers at a very difficult time for them. As my hon. Friend the Member for South-West Hertfordshire (Mr. Page) suggested, we must ensure that any potential benefit that could come to farmers actually reaches them, and does not merely benefit companies that might be commissioned to bring in such crops from abroad. That is an important point. I am sure it is not beyond the scope of joined-up government to bring it about.

One of the questions arising from the introduction of such an obligation is how it should be approached. I note that concerns are being expressed—for example, by the United Kingdom Petroleum Industry Association, to which I spoke this morning. It complains of

"the complete absence of consultation"

during preparation of the amendments,

"and hence any consideration by those most affected by them."

That is of concern, especially given that, as the Minister said, these new clauses set out various aspects of the obligation in some detail. It is unfortunate that the discussions with the industry did not take place before new clause 7 was introduced. As my hon. Friend the Member for South-West Hertfordshire noted, it is a shame that the new clause was not tabled in Standing Committee, when there would have been more time for discussion. We are rushing the proposal through the Chamber this afternoon, and there is only one hour left to debate many other important matters. It would have been useful if this new clause had been introduced in Committee, after discussions with the industry had taken place.

I hope, therefore, that the Government will consult with the industry before filling in the finer details of the obligation. Industry representatives have raised questions about how much the administrator will cost, who will pay for him and monitor him, who is a supplier and on whom the obligation will be placed. They want to know at what point the amount of biofuel will be measured and how quality can be assured, and they also need to be informed about the details of penalties and about who will get the certificates. The Government may feel that they have covered those issues, but the industry representatives who raised the matter with me this morning, and previously, are not satisfied.

That said, we support in general terms the concept of a renewable transport fuel obligation, and look forward to seeing how and when it will be implemented.

Alan Whitehead (Labour, Southampton, Test)

I shall not detain the House, but I want to say that I welcome the extended version of the obligation, which the Government have introduced after undertaking to do so in Standing Committee. However, I imagine that the obligation would apply, in the first instance, to bioethanol and biodiesel. How can we ensure that the industry, and those who supply the biomass from which those substances are derived, produce amounts that are relevant for conversion into biofuel? The extended version of the obligation does not make that entirely clear.

The hon. Member for South-West Hertfordshire (Mr. Page) asked how can we ensure that bioethanol and biodiesel are made in the UK, rather than imported. I note that new clause 9 contains a provision that means that biofuel produced outside the UK would not count for the purposes of the obligation. I imagine that that would enable the administrator and the Minister to specify, essentially, that biofuels are made in the UK.

I shall set out my understanding of how an obligation might work. In California, a similar provision was limited to ensuring that a certain number of cars should have the opportunity to run on biofuel. I believe that, under the proposed obligation, biofuel should be an essential component of the fuel that goes into cars from the pumps. That would mean that biodiesel would have to be mixed with diesel in a certain proportion, and the same condition would apply to bioethanol and petrol.

What would be the relative proportions in those mixtures, and what would be the relevant period as specified? Those are the important questions. I should be grateful if my hon. Friend the Minister, when he replies to the debate, would clarify what is meant by the phrase "for each specified period" in new clause 7. Various new clauses are being introduced to make the obligation possible, but it appears that a separate order would have to be laid before the House for each type of obligation being placed on the industry.

I suggest that the right way to go about introducing an obligation such as this is to ensure that the industry has certainty in the long term about what it is letting itself in for. That has been mentioned several times in this Chamber today. The industry needs to know how the obligation would be introduced, and over what period.

If we are to make sure that the supply of renewable fuel comes from within the UK and not from outside it, we must be certain that the industry has the necessary production capacity in the first place. Therefore, a form of escalator, whereby the obligation was introduced at perhaps 1 per cent. in one year, 2 per cent. the next year, 3 per cent. in a third year, and so on would seem the most appropriate way forward. I am not certain whether a separate order for each percentage increase would need to be introduced or whether an escalator could be introduced within the terms of the new clauses as they are set out.

I have raised a minor concern against the background of a warm welcome for the fact that we will now enshrine in statute the possibility of introducing an obligation. I believe that it is likely to be introduced shortly, bearing it in mind that an obligation working in the way that I have described would save about one third of the carbon dioxide emissions that are envisaged in the transport section of the climate change plan without having to put in place new infrastructure or to consider different forms of engine design or manufacture or development of supply at the pumps. I welcome the new clause and hope that, with the clarification that I have sought, it will be supported by the House.

Andrew Stunell (Liberal Democrat, Hazel Grove)

The terms of the new clauses are substantial and very necessary, but I echo the comments made by the hon. Member for Tewkesbury (Mr. Robertson) when he said that they had been introduced at the last minute. It is a great pity that we did not have the opportunity to look at them in the detail from which they would have benefited.

We broadly support the intention in the new clause. Transport uses 25 per cent. of primary energy in the United Kingdom and there is plenty of scope for reducing carbon emissions in a pain-free way. We are not talking necessarily about restricting people's access to transport so much as giving them a carbon-free or, more accurately, a carbon-neutral source of energy. In so far as the fuel obligation can work towards achieving that, we welcome this mechanism.

However, the Government have introduced nine pages of new text that I suspect will translate into about 20 pages of Bill material. I was notified of it by a letter sent to me on 6 July. That act has cut out of the process the opportunity to raise a number of legitimate concerns and questions.

In common with a number of other hon. Members, I have received a briefing from British Sugar, which is one interested party. I do not know whether the points that it makes have legitimacy or not, but we have not had the opportunity to test them out or to allow the Minister to respond to them. Other possible consultees in the industry and those who would like to be part of that industry have been left out of the process. I have a concern about inserting such an amount of material into the Bill raw and unexamined. I hope that the Government will be open to further consideration in the Lords because there are obviously matters of detail, in some cases quite significant ones, that need to be sorted out.

British Sugar refers to the fact that any such fuel has to be derived wholly from biomass, which rules out any mixing procedure, which is often used when the product is used. Even at the most basic definition level there are serious questions to which I as a Member of Parliament do not know the answer and will not get the opportunity to test the Minister on.

On a slightly wider platform, we have an opportunity here to develop a new production industry in this country and contribute to creating a cleaner economy. Therefore, the foundations that we lay in the Bill are important to ensure that that is achievable. One of the issues is to what extent the raw product will be grown in this country. I made the point in Committee that at present much of the biomass material that is the subject of experiments by, for instance, the electricity generating industry is imported from overseas, primarily from tropical and sub-tropical countries, where growth rates are higher and labour costs are lower and, therefore, the material is more readily available.

The material does not primarily come from UK farming sources, and there are ways in which the amount that does come from such sources can be maximised. However, we need to be fully aware of the fact that such material comes from overseas at present. The largest producer of biofuel is Brazil. It is worth noting that the most efficient way of bringing the product to this country is not bringing the agricultural product here and processing it in this country, but processing it at the point of growth and importing the fuel. In terms of carbon reduction, I have no objection to that, but the Minister needs to recognise that it would not benefit UK agriculture or UK industry, either in producing the plant to do the processing or in providing the labour and investment for the processing to take place. That is not a reason to oppose the proposal, but it is a reason for taking time to think through the mechanics of the fiscal and regulatory system that the Minister intends to introduce, so that we do not face unintended consequences. We might reduce carbon emissions from vehicles but fail to maximise the economic and social benefits that might otherwise be available.

We will support the new clauses, but we are concerned by the lack of opportunity that the House has had to bring to bear its critical faculties—and that the industry has had to bring to bear its knowledge and experience—to improve the proposals.

Stephen Timms (Labour, East Ham)

I am pleased that the new clauses have attracted the support that they have, although it is slightly churlish to complain that it has not been possible to consult as widely as might have been ideal, because the proposals were not in the Bill when it started its journey through Parliament. They have been added since, and much credit is due to officials for their efforts in providing a worked-up set of clauses to add to the Bill. Of course, we will need much consultation and discussion beyond this stage about how the framework will be put into practice.

The hon. Member for Tewkesbury (Mr. Robertson) is right to say that the new clauses contain a permissive power: the Secretary of State will not be required to introduce a scheme but may decide to do so following consultation. My hon. Friend the Member for Southampton, Test (Dr. Whitehead) described a model for the obligation that sounded very similar to the renewables obligation, which has an increase each year and a future period during which the obligation applies. As I said in opening the debate, the clauses are closely modelled on the renewables obligation, so progress could be made on such a model using these clauses. We want to have a full discussion with the industry and others—including the association mentioned by the hon. Member for Tewkesbury, for example—to ensure that we get the details absolutely right before we decide whether to proceed. The new clauses would allow us to do that.

The hon. Member for Hazel Grove (Mr. Stunell) asked about biofuels produced using some fossil energy. We can address such details in secondary legislation, and we will consult on them, but in principle the clauses would allow blended biofuels of the kind that he mentioned. Time has been tight, but the benefit is that we have worked-up clauses that will, if we choose to do so, allow us to introduce an obligation for which I sense there is wide support on both sides of the House.

On the question put by the hon. Member for South-West Hertfordshire (Mr. Page) about imports and domestically produced material, the answer will depend in part on how the obligation is framed. We shall certainly have to take account of that when we undertake the work, but the hon. Member for Hazel Grove is right: the main aim of the measure is to achieve carbon savings, whether the biofuels are made in this country or elsewhere. There could be a big prize for UK agriculture and industry, and if we decide to proceed I hope that we shall be able to realise it.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 8 — Administrator

New Clause 9 — Further provision relating to rtf orders

New Clause 10 — Renewable transport fuel certificates

New Clause 11 — Discharge of obligation by payment

New Clause 12 — Imposition of civil penalties

New Clause 13 — Objections to civil penalties

New Clause 14 — Appeals against civil penalties

New Clause 15 — Interpretation of Chapter 4 of Part 2

New Clause 1 — Regulations relating to proposed disconnection of electricity supply

Anne McIntosh (Conservative, Vale of York)

I beg to move, That the clause be read a Second time.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss the following amendments: No. 48, in page 132, line 26 [Clause 173], at end insert—

'(1A) It shall be a duty of every supplier of gas to ensure that the standing charge, if applied, and the unit cost of gas supplied by means of a pre-payment meter shall be no more than the standard charges applied to customers purchasing gas by means of quarterly bills.'.

No. 49, in page 133, line 16 [Clause 173], at end insert—

'(2A) It shall be a duty of every electricity supplier to ensure that the standing charge, if applied, and the unit cost of electricity supplied by means of a pre-payment meter shall be no more than the standard charges applied to customers purchasing electricity by means of quarterly bills.'.

Anne McIntosh (Conservative, Vale of York)

It gives me great pleasure to introduce the new clause; it is a timely proposal and one on which the Under-Secretary will, I think, look favourably—if he can drag his attention back to the business of the House for a moment. The consultation process undertaken by the Government threw up several ideas, and we have drawn on them. The National Consumer Council and some other non-governmental voluntary organisations, notably Age Concern, expressed concern about the rate of disconnection, which continues to grow unacceptably.

Our proposals would give the Secretary of State power to make regulations setting out procedures to be followed in the event of a proposed disconnection. The National Consumer Council, Ofgem and the Energy Retail Association are in agreement that such procedures should apply in particular to households where there are

"customers of pensionable age . . . adults or children who are disabled or have a long-term illness, or . . . children aged five or under".

Ofgem and the Energy Retail Association should be invited to revise the proposals to prevent the disconnection, at any time, of households where anyone is in those categories.

Our new clause also sets out the role of local authority social services departments in relation to proposals for disconnection. That would offer the Government a good opportunity to set out in the Bill those provisions of the Data Protection Act 1998 relating to disconnections, bearing in mind the tragic case of the elderly couple whose electricity supply was disconnected. Rightly or wrongly, the social services department used the provisions of the Act so as not to intervene.

We have set out what we believe is the best definition of the term "vulnerable customer". It would be interesting if the Minister were to say what definition his Department currently uses. Our understanding is that there is no statutory definition. I understand that the Energy Retail Association proposes to use a definition along the following lines:

"A vulnerable customer at risk from disconnection will be unable to safeguard his or her personal welfare or the welfare of any children in the household, and will be in need of care and attention by reason of age or infirmity, or suffering from chronic illness or mental disorder, or substantially handicapped by being disabled."

I could go on much longer, but mindful of the other sets of amendments that we have yet to consider, I simply propose the new clause in the hope that the Minister and the Government will see it as a helpful response to the excellent points made in the consultation process by the National Consumer Council and others. It would enable the Government to draft regulations so that there is less scope for disconnection, which leads to tragic consequences, and to set out what the role of local authority social services departments should be.

Martin O'Neill (Labour, Ochil)

It would be unfortunate if new clause 1 were passed. It would not do very much. To rely on anything that the people who sell electricity are prepared to advocate as a means to protect disadvantaged consumers is rather like asking foxes to make the security arrangements for a chicken coop. The definitions that they have provided are in no way valid. They are nothing like as comprehensive as they should be. It is not for nothing that Energywatch—the consumers' energy protection organisation—rubbished the idea. It is also wrong to suggest that the proposal comes from Ofgem—it does not. Ofgem asked the Energy Retail Association to make proposals that would avoid the possibility of the tragedy to which the hon. Member for Vale of York (Miss McIntosh) referred. Ofgem did not sponsor the research or the report; it requested it, and I understand that it has yet to pass judgment on whether to accept it. We have not yet produced our report, but if the hon. Lady had read the Select Committee on Trade and Industry's proceedings on disconnection, she would have seen that the proposal does not enjoy the imprimatur of Ofgem. Ofgem merely asked ERA to produce a report, which it is still considering. As far as I know, ERA does not have too many friends in that area. I am not sure whether the National Consumer Council has a view—it has been cited as having one—but the Gas and Electricity Consumer Council, Energywatch, has a view: it does not regard the proposal as satisfactory.

The new clause certainly bears the hallmark of the kind of legislation that the Tories proposed in the 1990s, when they spoke about those people who should be protected. Indeed, under the Gas Act 1995—I was about to say the Gas Bill—they made provision for age and disability, but not for economic disadvantage. They made no provision for the poor. If one group is just as entitled to claim protection from disconnection as the sick and the elderly it is the economically disadvantaged. Frankly, that group is not addressed by the new clause.

When the Under-Secretary responds—if he will give me a minute of his attention—perhaps he will tell us the actual cost of disconnection. I understand that estimates range from £150 to £450 per disconnection, so there is a lot of uncertainty. It is one thing to have a system with a series of protections for people who are vulnerable because of their income, age or physical infirmities, but it is quite another for disconnection to be simply a first resort for some sections of the community. I am not happy at all with the current provision. Anyone involved with fuel poverty in this country—perhaps I should declare an interest as honorary president of Energy Action Scotland, a Scottish charity engaged in trying to eradicate fuel poverty—has little good to say about the proposal in the new clause. As I said, it was considered by the Trade and Industry Committee, which I am fortunate to have the honour of chairing.

Disconnection is one of the most regrettable and unacceptable manifestations of poverty in our society. We heard pious speeches earlier this afternoon about the lights going out, but if the lights go out for one poor family, that is just as devastating for them as if it happens to the whole country because of the failure of a Government or an electricity company to invest. [Interruption.] Well, one is as bad as the other, but the new clause contains no reference to the poor. It refers only to people who are physically infirm or elderly. It is far too restrictive and represents a piece of irrelevant opportunism by the Tories. It would not clarify the situation or protect the poor in any way, shape or form. The present arrangements are no better or worse than the proposals. If the hon. Lady had given any thought to the matter, she would have realised that the proposal was a sham put forward by those who make a living from selling electricity. It is an attempt to square their consciences with a tragedy for which they were not responsible—other players were involved.

Anne McIntosh (Conservative, Vale of York)

Obviously I am grateful to the hon. Gentleman for allowing me to intervene on his rant. I am mindful of his position in Scotland. Given that he is a Scottish Member, perhaps he did not think that he was in a position to read the comments of the National Consumer Council, which will be disappointed to hear of his complete disregard for people whom it considers to be extremely vulnerable customers. I think that one household that faces disconnection in such circumstances represents a tragedy.

Martin O'Neill (Labour, Ochil)

The people who know specifically about energy consumers, representatives of Energywatch, disowned the proposals before the Select Committee that I chair. They are far more expert than the broad-brush merchants of the National Consumer Council. [Interruption.] The hon. Member for Vale of York can smile and laugh, but the people who have disparaged the proposal are the specialists in the field.

The new clause is similar to provisions put forward by the Tories in the 1990s when they were responsible for trying to protect poor consumers. It is not satisfactory, and I hope that the Government will not accept it because it would set back a debate that is just beginning to be engaged in. We must determine whether it is necessary for failure to pay energy bills to result in disconnection. Such arrangements are no longer in place for water, so why should they exist for electricity? We should outlaw such action once and for all. The ERA is interested not in doing that, but in creating conditions that would make it more difficult.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I must say that I was rather disappointed with the contribution of the hon. Member for Ochil (Mr. O'Neill). Whatever one might say about the Conservatives—I have said some things about them in my time—there is nothing wrong with the new clause, which is why I was happy to add my name to it.

The hon. Gentleman should not look so hard at the messenger but should take a look at the message: we have to tackle the issue of disconnections. I believe that the new clause is a sensible way of moving forward, and it has not come out of the mischief-making cupboard that has been mentioned a couple of times today. It has a good provenance and a good intention, and it seems capable of achieving some benefit for the disadvantaged in society, including those in Hazel Grove, as well as in Ochil. Whatever its merits or demerits, I do not think that he has served the debate very soundly.

In Committee, where we discussed the issue only very much in passing, it was pointed out that there are serious considerations in developing this country's energy policy, as it is not simply about demand and supply, but about the protection of consumers. The White Paper made that point, which has been endorsed by all political parties. I took it that the new clause had been tabled in that context and as a step towards filling the policy vacuum arising from the Bill's general inadequacy in fulfilling the obligations set out in the White Paper.

Even if the Minister does not feel able to accept new clause 1 in its current form, I hope that he will give us some assurances that this gap in the Bill will be filled and that, even if that cannot be done here and now, it will be done when the Bill goes back to the Lords in a week or two.

Michael Weir (Scottish National Party, Angus)

I shall be very brief, as I canvassed the issue in Committee, where we had an interesting debate about it.

The amendments that I tabled in Committee sought to reduce payments through pre-payment meters by a slightly different route from that taken in amendments Nos. 48 and 49, in which I am seeking to ensure that such payments are equal to those paid in quarterly bills.

This is a serious problem. Figures from Energywatch show that 30 per cent. of all consumers on incomes of less than £6,500 and 50 per cent. of all single parent families use pre-payment meters. Energywatch also disclosed that 65 per cent. of gas pre-payment meter users were in debt, which effectively meant that they could not move to alternative suppliers.

The British electricity trading and transmission arrangements have been sold to us on the basis that they will mean lower prices for consumers, but they will not necessarily mean lower prices for those on pre-payment meters—the people who can least afford higher prices. There can be considerable differences in annual costs for those on such meters, as opposed to those who pay by regular bills, and the differences are even greater for those who pay by direct debit. Interestingly, many of those on low incomes who use pre-payment meters will be the same people who do not have bank accounts, which makes direct debit an almost impossible option.

It is perverse that the poorest, who spend the greatest proportion of income on energy, are least able to get the best deals. Those on the lowest earnings spend 9 per cent. of their income on energy, while those on higher incomes spend 2 per cent., yet those on pre-payment meters pay about 20 per cent. more for gas and 6 per cent. more for electricity. That is a significant difference, especially for those on low incomes.

In some areas, but not all, there is a premium on the standing charge rather than the electricity itself; hence the wording of the amendment. It is worth noting that it is perfectly possible for the standard charge to be waived. Indeed, I note that London Electricity introduced a pilot scheme called Powerkey Plus that did just that.

My amendments are therefore an attempt to pass on some of the benefits of lower energy prices to consumers who are on pre-payment meters. It would be impossible to give such consumers the same deals as those who can pay by direct debit, so I have framed the amendments to try to give them some benefit and perhaps contribute in a modest way to ending fuel poverty.

Nigel Griffiths (Labour, Edinburgh South)

This group of amendments draws together two separate issues—the disconnection of electricity supply and the tariffs paid by those with gas and electricity pre-payment meters. I shall deal first with new clause 1, which relates to electricity disconnections. Electricity disconnections represent less than one tenth of all fuel disconnections. In response to my hon. Friend the Member for Ochil (Mr. O'Neill), the cost of disconnection varies from supplier to supplier, but I understand that the evidence given to the Select Committee on Trade and Industry suggests that the whole process, if it leads to final disconnection, costs about £150.

New clause 1 would directly involve the Secretary of State in the regulation of one aspect of electricity supply by requiring her to make regulations in respect of electricity disconnections. She would be required to prescribe procedures in respect of disconnections of households with customers or residents who were of pensionable age, disabled, had a long-term illness or were under five. She would also be required to make provision for the role of social services departments in disconnections. Disconnections for debt should of course be minimised, and appropriate safeguards should be built into disconnection arrangements, especially for vulnerable customers. Those arrangements should be carefully monitored and, where necessary, improved. Indeed, it is because action has been taken to improve them that the new clause is unnecessary.

This year, Ofgem, with the encouragement of my hon. Friend the Minister for Energy, E-Commerce and Postal Services, has been in extensive discussion with suppliers about disconnection activity. Those discussions focused on improving processes for identifying and dealing with vulnerable customers and on clarifying procedures for notifying relevant agencies where vulnerable customers were in payment difficulties. In April, that led to proposals for improved industry-wide arrangements that will be set out in an industry code of practice. Ofgem published that consultation paper to maximise both the audience and the response. The key elements of the consultation were an agreed definition of vulnerability and guidance on the operation of the Data Protection Act 1998. The proposals were designed to ensure that, as far as possible, vulnerable customers would not be disconnected in future.

The consultation has now closed, and a range of responses has been received. I expect the final proposals, which should be published shortly, to be improved in the light of those responses. In particular, I expect the definition of what constitutes a vulnerable household to be widened and more detail to be given on the range of bodies with which suppliers can work in dealing with vulnerable customers and on the arrangements for involving those bodies, whether they be social services or other caring organisations. The new arrangements will then be applied. Ofgem retains the power and the right to propose changes to suppliers' licences if the arrangements do not serve their intended purpose.

Although I understand what the hon. Member for Vale of York (Miss McIntosh) is trying to achieve in the first part of her new clause, that activity is already in hand and is being dealt with by those who should be responsible—the industry, working with the guidance of the regulator.

Let me turn to the second main element of the new clause—the role of social services. It would serve no practical purpose for the Secretary of State to prescribe behaviour or activity as the new clause envisages. The organisation that needs to be involved, be it a social services department or a caring organisation, will vary from case to case, as will what those organisations will need to do. The key is not to prescribe a particular action or role, but to ensure that suppliers are ready and able to involve social services or others. The code provides for that. The consultation paper that was issued in April also provided useful guidance from the data protection commissioner about when companies might legitimately reveal information about customers to social services and others. The code, not a legislative responsibility imposed upon Ministers almost by whim, is the right way to deal with this issue.

As well as being unnecessary, the proposal is flawed in two other ways. The first flaw is a practical one. As I said earlier, the bulk of the disconnections occurs in gas supply, whereas the new clause deals only with electricity. By implementing the proposal, we would create a striking asymmetry between the duties that are imposed on suppliers. Last year, the new clause would have applied to possibly only 8 per cent. of disconnections through debt. In 2002, it would have applied to 4 per cent. The number of vulnerable customers in those small percentages would have been minute.

Although I welcome the hon. Lady's interest in the social aspects of the energy market, there are strong philosophical and practical arguments against legislating in the way she proposes. It is entirely right that Parliament and the Government should be involved in developing and setting energy policy and the role of the regulator in that energy framework. However, that is a long way from micro-managing regulatory activity or interfering in the province of the regulator on the basis of the hon. Lady's current thinking. The new clause would do that. We may not agree with Ofgem's approach on all matters, but we must let it do its job. In the case that we are considering, it has done so. It played a key role in driving the industry to take action without the need for primary or, at this juncture, secondary legislation. That is an example of regulation and self-regulation carrying out is proper function. I urge hon. Members to give it the chance to work.

Amendments Nos. 48 and 49 deal with pre-payment meter tariffs. They would make identical changes to the Gas Act 1986 and the Electricity Act 1989, as amended. They would require the unit cost of gas or electricity supplied through a pre-payment meter to be no more than that of gas or electricity supplied under a standard credit tariff. If suppliers continued to apply a standing charge, it would have to be the same for both payment methods.

The amendments represent an amended version of those that were considered and rejected in Committee. In their revised form, they remain unacceptable. They would be unfair to many of the most vulnerable energy consumers. Although I fully understand and share the concern of the hon. Member for Angus (Mr. Weir) for pre-payment meter customers, some of whom will be on low incomes, it is not true to say that all pre-payment customers are disadvantaged or fuel poor. Indeed, not only are pre-payment meter customers no more likely than standard credit customers to be fuel poor, but pensioners, who make up about half the fuel poor, represent less than 10 per cent. of pre-payment meter users. The amendments would mean that pre-payment meter customers would be subsidised by other customers, many of whom would be on low incomes, and whose bills would rise accordingly.

The cost to suppliers of serving pre-payment meter customers is higher than that of serving other customers, chiefly because of the cost of the meters and the infrastructure required to support them. Some companies have structured their credit and pre-payment tariffs to the benefit of pre-payment meter customers. That is a matter for them, and pre-payment customers may, in a competitive market, choose to be supplied by them. However, companies should be allowed accurately to reflect costs and properly to apportion them between their customers. I therefore regret that I cannot support the amendments, and I hope the hon. Lady will feel able to withdraw them.

Anne McIntosh (Conservative, Vale of York)

In view of the Minister's conciliatory tone and his appreciation of the vulnerability of some customers and Ofgem's excellent work, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 17 — Environmental principles for purposes of Part 1

Norman Baker (Liberal Democrat, Lewes)

I beg to move, That the clause be read a Second time.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this, it will be convenient to discuss the following: Amendment No. 26, in page 3, line 31 [Clause 3], leave out subsection (4) and insert—

'(4) The Secretary of State must satisfy himself on an annual basis that any person with control of a nuclear installation who is not—

(a) a Crown appointee;

(b) the UKAEA;

(c) a wholly-owned subsidiary of the UKAEA;

(d) any other publicly owned company which was so owned on 4th July 2002;

(e) a wholly owned subsidiary of such a company; or

(f) the NDA itself, is taking the necessary steps to ensure that decommissioning work and liabilities will be fully funded through the establishment and maintenance of a fully segregated fund for that purpose and that an appropriate contribution is made to the funding of the designated long-term nuclear waste management body.'.

Amendment No. 41, in page 3, line 38, at end insert—

'(4A) The provisions of subsection (4)(e) above shall only be exercised in respect of British Energy following bankruptcy of that company.'.

Amendment No. 37, in page 4, line 21, at end insert—

'(10) No powers allocated to the NDA shall be taken to affect the powers and duties of NIREX.'.

Amendment No. 42, in page 5, line 29 [Clause 5], at end insert—

'(5A) The provisions of subsection (5)(e) above shall only be exercised in respect of British Energy following bankruptcy of that company.'.

Amendment No. 38, in page 7, line 10 [Clause 7], at end insert—

'(1A) The NDA shall undertake no activities that will lead to an increase in the generation of nuclear waste except pursuant to the safe operation of nuclear plants for power generation.'.

Amendment No. 39, in page 7, line 18, at end insert—

'(2A) The NDA shall not allow considerations relating to the potential generation of income to result in additional production of nuclear wastes.'.

Amendment No. 29, in page 8, line 33 [Clause 9], leave out

'need to safeguard the environment'

and insert

'environmental principles set out in section [Environmental principles for purposes of Part 1] and'.

Amendment No. 30, in page 8, line 34, leave out paragraph (c).

Amendment No. 31, in page 8, line 39, leave out paragraph (a) and insert—

'(a) to ensure that the health and safety of people and the environment must be protected from the harmful effects of nuclear wastes;'.

Amendment No. 32, in page 8, line 42, leave out paragraph (b) and insert—

'(b) to ensure that the costs of pollution must be borne by the person or body responsible for causing the pollution; and'.

Amendment No. 33, in page 9, line 1, leave out paragraph (c).

Amendment No. 34, in page 9, line 4, after first 'to', insert

'section [Environmental principles for purposes of Part 1](1),'.

Amendment No. 40, in page 9, line 4, after first 'to', insert 'section 7(2A),'.

Amendment No. 35, in page 9, line 4, leave out 'to (c)' and insert 'and (b)'.

Government amendments Nos. 11 and 12, and 15 to 17.

Norman Baker (Liberal Democrat, Lewes)

I am sorry that we have just 21 minutes left of the Report stage. Members of all parties have been brief and to the point this afternoon, but we are still running out of time. Other important amendments have still to be discussed; I guess that they will be picked up on Third Reading, if at all.

I was complimenting the Minister earlier for having taken on board certain points that had been raised in Committee. That was true, but none of them relate to the nuclear industry. There has been a studious refusal by the Government to take on board the points that were made properly and convincingly on that issue by several Members in Committee. The Bill will make £48 billion of public money available to decommission the nuclear industry, which is £8,000 for every man, woman and child in this country. That is one reason why the uncharacteristically glib suggestion by the hon. Member for Salisbury (Mr. Key) that we should have a new season of nuclear power stations needs to be taken with a pinch of salt, given the massive cost to the taxpayer. The second reason is, of course, the amount of nuclear waste that is mounting across the country as we speak.

The proposal for a nuclear decommissioning authority is a sensible one. My colleagues and I have always welcomed the idea that such an authority should be set up to deal with this problem, which has been allowed to fester for far too long. Unfortunately, however, the way in which the Government proposes to set up the NDA has worrying aspects. They were raised in Committee, and I am bound to say that we did not receive satisfactory answers from the Minister to some of the salient points that we made.

The NDA has no overarching environmental responsibility, which seems extraordinary for a body that is to deal with nuclear waste. I draw the Minister's attention to new clause 17, which seeks to instil some environmental principles into the NDA. The general principles set out in subsection (2) are:

"(a) that the health and safety of people and the environment must be protected from the harmful effects of nuclear wastes;

(b) that the costs of pollution must be borne by the person or body responsible for causing the pollution; and

(c) that international best practice in radiation protection should be implemented."

Subsection (3) states:

"In addition to the above principles, the NDA should also seek to ensure—

(a) that the creation of nuclear waste should be avoided or minimised;

(b) that nuclear wastes should be concentrated and contained rather than diluted and dispersed throughout the environment;

(c) that the most hazardous wastes are prioritised for conditioning to put them into a passively safe state; and

(d) that there are no unnecessary transports of waste."

Those are completely uncontroversial, commonsense principles, and I fail to see why the Government do not want to adopt them. Perhaps the answer is that the NDA will not simply be a body that is set up to decommission the nuclear industry and to deal belatedly with some of the environmental mess that it has caused, as some of us wish it to be. Perhaps it will have the further function of providing an income stream for the Treasury. Members on both sides of the House have made the point that there has been a refusal to allow segregated funds to be established. That would be dealt with by amendment No. 26, which was tabled by my hon. Friend the Member for Hazel Grove (Mr. Stunell) and me.

We believe that the NDA is going to continue to be allowed to operate plants ad infinitum. That is on the record from the Minister in Committee. There is no absolute cut-off point; it will be able to continue to operate those plants. Indeed, if the hon. Member for Salisbury is correct in his assertion that there is going to be a big gap in our energy supply, the NDA could suddenly be called on to carry on operating those plants indefinitely. That is not what is intended for the NDA, but it is allowed for in the Bill. That should not be the case, and the amendments would prevent that from occurring.

Let us be clear about this. There is a nuclear generation industry, for better or worse, and there should be a decommissioning industry as well. We should not mix the two up, which is what the Government are doing as a result of the way in which they have structured the NDA in the Bill. I detect the hand of the Treasury here. It wants money back from the nuclear industry. It is baulking, understandably, at the £48 bill that has landed on Gordon Brown's doormat, and it wants some money back. The way to do that is to get an income stream from the NDA, which would get the money from generating electricity and otherwise using the existing plant. So the irony is that the NDA, which is being set up to decommission the industry, is actually going to be given the power to generate further waste. That is what the Government have set out in the Bill, but amendments Nos. 38 and 39 would explicitly prevent that from happening.

Amendment No. 38 states:

"The NDA shall undertake no activities that will lead to an increase in the generation of nuclear waste except pursuant to the safe operation of nuclear plants for power generation."

That would prevent any reprocessing, which the Minister is apparently also happy for the NDA to be involved in. Amendment No. 39 states:

"The NDA shall not allow considerations relating to the potential generation of income to result in additional production of nuclear wastes."

That should be the position of the NDA. We should separate the generation capacity from the decommissioning capacity, but as a result of the way in which the Government have structured the Bill, that has not been done. The NDA will even be enabled to hand over money, and power, to British Energy, a private sector company. That is what is allowed for in the Bill.

The Minister said that of course there must be a backstop, in case nuclear waste is arising and a private company cannot handle it. Yes, but does not that allow a nice let-out for British Energy, which already has a pretty nice credit line from the DTI? That money could be used for other purposes. Our amendment suggests that that option should only be exercised if British Energy goes bankrupt. It is then a matter for the public purse to deal with, for the sake of the environment. Of course we must deal with it in that situation, but Parliament's role, and the DTI's role, is not to bail out private companies. The Minister should therefore accept that amendment too.

I am conscious of time, and other Members want to speak. I suggest to the Minister, however, that he has convinced neither the Committee, nor, I suspect, the House, on the nuclear aspects of the Bill. As I said to the Minister in Committee, the Government's nuclear policy is not bad, but it is not reflected in the Bill that has been written for him.

Stephen Timms (Labour, East Ham)

As the House will know, the spending review announced yesterday by my right hon. Friend the Chancellor included a good settlement for the NDA, with a budget of some £2 billion a year for the three years of the spending review period. The NDA will therefore be well placed to achieve the targets that we have set for safe, secure, cost-effective and environmentally friendly nuclear clean-up.

New clause 17 and amendments Nos. 29 to 35 would establish general, overarching environmental principles that should govern the operation and behaviour of the NDA. Our position is clear: the protection of the environment and the safety of people are central to the objectives and activities of the NDA and of its site operators. Ensuring the observance of the high standards that we have in the UK is the responsibility of the nuclear regulators. Nothing in the Bill alters the regulatory framework, and potentially, it would be seriously damaging to cut across that well-established regulatory framework by giving the NDA, as this proposal would, a principal objective of ensuring the delivery of what are regulatory requirements. We must not do anything to undermine the successful work of the regulators.

Amendments Nos. 38 to 40 would constrain the NDA's activities by ruling out the generation of additional nuclear waste. That is an admirable objective but could impose damaging constraints on the work of the NDA in managing nuclear clean-up effectively. That is a decision for the NDA properly to make within the framework of its duties and responsibilities.

Amendment No. 37 would delineate the roles and responsibilities of the NDA and Nirex. The Government have established the Committee on Radioactive Waste Management to advise on long-term policy for the management of higher-activity wastes. The future roles and responsibilities of the bodies involved will be decided in the light of that advice.

Norman Baker (Liberal Democrat, Lewes)

How is it that the Minister can announce the chair of the NDA before the Bill is even passed, but cannot announce the separation of roles between Nirex and the NDA when the Bill is almost complete?

Stephen Timms (Labour, East Ham)

The hon. Gentleman will recall that we had extensive discussion in Committee about the position on the NDA and Nirex, and I set out the arrangements by which we had been able to appoint a chair designate, because of the importance of the NDA and of having the authority in place by April next year.

On amendment No. 26 on financing, it is already the Government's policy to require the establishment of segregated funds for privatised parts of the nuclear industry—for example, in the case of British Energy. We do not consider it necessary to extend that to all private sector companies with nuclear facilities. We will take decisions on whether to establish a long-term nuclear waste management body once we have received advice from the Committee on Radioactive Waste Management.

Amendments Nos. 41 and 42 would prevent the Government from exercising effectively an important option in respect of restructuring agreements to protect taxpayers' interests. We have taken an option to buy each of British Energy's nuclear power stations for £1 at the time that British Energy plans to shut them, either to decommission them or to continue to operate them beyond that date. It may be possible to decommission them more cost-effectively in the public sector, using expertise gained by the NDA on public sector nuclear sites. It might also be possible to defer decommissioning costs, which would fall on the nuclear liabilities fund, which is underwritten by Government, by operating the stations and generating income beyond the date when British Energy would shut them. Those benefits, and the protection that they offer the taxpayer, would be lost if we were prevented from passing British Energy sites to the NDA to decommission only if British Energy was bankrupt. I do not think that the proposed change is sensible.

Brian Wilson (Labour, Cunninghame North)

It does not look as though we shall have time to discuss the final group of amendments. Will the Minister confirm that British Energy had to be bailed out because of the market-driven ideological zeal of Ofgem? Would it not be a pity if the same approach were applied to renewable energy and transmission systems? That too would fly in the face of Government energy policy and ultimately Ofgem would make a decision against the national interest, the energy interest and the public interest.

Stephen Timms (Labour, East Ham)

I think that my right hon. Friend is stretching a point by trying to bring in the last group of amendments at this stage—and I do not think that he is being fair in saying that what happened to British Energy was entirely down to Ofgem. No doubt we shall still be able to have some exchanges about that last group.

Amendment No. 32 places a duty on the NDA to ensure that the polluter pays for nuclear clean-up. The NDA is not the appropriate body to determine who pays for clean-up. The Government's position is clear. We support the polluter pays principle, but when that proves impossible it is right for Government to determine the appropriate arrangements for financing clean-up. The Bill allows the NDA to be made responsible for securing the clean-up, and for the levying of appropriate charges.

I undertook in Committee to consider what could be done to respond to suggestions from the hon. Member for Tewkesbury (Mr. Robertson) about increasing parliamentary oversight of the NDA's activities. I hope that he will welcome amendments Nos. 11 and 12, which require the NDA's strategy and annual plan to be laid before Parliament, and provide for parallel provisions for the Scottish Parliament that have been agreed with the Scottish Executive. Amendments Nos. 15 to 17 make three minor drafting changes arising from the last detailed check of the Bill.

Laurence Robertson (Conservative, Tewkesbury)

It is regrettable that we must rush through 20 new clauses and amendments, with two more groups to debate in the remaining eight minutes. I will not go into as much detail as I would otherwise. It is also regrettable that the hon. Member for Lewes (Norman Baker) took such an anti-nuclear stance when raising important points. I agree with the hon. Gentleman that the relationship between Nirex and the NDA should have been determined long before the Bill was even introduced but, mindful of the time, I will not go into that.

I welcome amendments Nos. 11 and 12. As expected, the Minister has been as good as his word. They are important amendments that allow the House sight of the financial plan and the NDA's strategy. Given the amount of money to be allocated to and deployed by the NDA, and given that it will do so much work, it is vital for Parliament to have sight of the reports. We pressed for that in Committee, and I am grateful to the Minister for tabling the amendments.

Norman Baker (Liberal Democrat, Lewes)

I am not convinced by what the Minister said. He has failed to grasp the nuclear nettle. There are numerous outstanding issues relating to finance, the construction of the NDA and its relationship with Nirex. As there is very little time anyway, I intend to press the new clause to a vote.

Clause 81 — Principal objective to promote renewable energy

Clause 82 — Reports under Section 1 of sustainable energy Act 2003

Clause 98 — Installations in territorial waters and renewable energy zones

Clause 100 — Extinguishment etc. of public rights of navigation

Clause 101 — Further provisions relating to public rights of navigation

Clause 116 — Discharge of renewables obligation in great britain by payment

Clause 125 — Renewable transport fuel obligation

Clause 140 — Consequential amendments of the 1989 act

Clause 182 — Application of general duties to part 3 functions etc.

Clause 185 — Service of notifications and other documents

Clause 190 — Short title, commencement and extent

Schedule 2 — Procedural requirements applicable to nda's strategy

Schedule 3 — Procedural requirements applicable to nda's annual plans

Schedule 6 — Structure etc. of transferee companies

Schedule 7 — Finances and accounts of transferee companies

Schedule 9 — Taxation provisions relating to nuclear transfer schemes

Patricia Hewitt (Labour, Leicester West)

I beg to move, That the Bill be now read the Third time.

I am particularly grateful to my hon. Friend the Minister for Energy, E-Commerce and Postal Services for his highly skilful and assiduous handling of the Bill during Committee and Report stages, and also to my hon. Friend the Minister for Small Business and Enterprise for his valuable contribution at both stages. May I express my thanks to them and to all hon. Members who served on the Standing Committee?

The Bill is part of the Government's continued commitment to deliver a sustainable energy future for the United Kingdom. We face enormous challenges—climate change, declining indigenous energy supplies and ageing infrastructure. We cannot ignore those challenges, for our own sake and for the sake of future generations.

In the energy White Paper that I published last year we set out how we would tackle fundamental changes in our energy environment, and we set challenging goals—to cut greenhouse emissions by 60 per cent. by the middle of the century, with real progress by 2020, to secure reliable energy supplies, to maintain competitive markets at home and abroad, and to ensure that every home in our country is adequately and affordably heated. We are working hard right across Government to deliver on all those commitments and, following my right hon. Friend the Chancellor's announcement yesterday, we have the resources to do so.

The Bill is an important part of an even larger picture of activity delivering on the White Paper. Much of the discussion that we have had in the House and in Committee during the passage of the Bill focused on that bigger picture, and rightly so—the Bill presented an excellent opportunity for debate. In April, we published our first annual report on the implementation of the White Paper, setting out what we are doing to deliver our commitments.

I refer particularly to the issue of security of supply, which is of huge importance and is recognised as such in all parts of the House. The new duty to report annually to the House on security of supply underlines how seriously we in Government take that issue. But we know from business and consumers that primary legislation is not always the answer. We have to be creative and flexible to overcome many of the challenges that we face. As ever, we will regulate only where it is appropriate and with a light touch.

Many other issues have arisen during our debates. Energy efficiency was mentioned by a number of my hon. Friends and by Opposition Members. We remain committed to increasing investment in energy efficiency, as it is by far the most cost-effective way to meet all our energy goals. The energy efficiency action plan aims to deliver more than 12 million tonnes of carbon saving—well beyond the 10 million that we anticipated in last year's White Paper. There is also the potential of saving consumers more than £3 billion a year by the end of the decade.

I recognise that there has been some disappointment that our goal of delivering annual savings of more than 4 million tonnes of carbon for the household sector by 2010 is lower than what we initially projected in the White Paper. Since that was published, we have continued to refine the projected savings that we can achieve in that sector. None the less, the objective that we are setting currently represents a demanding increase in activity from the industry. It also requires us to promote sustained consumer demand for greater energy efficiency.

We will review our progress on the energy efficiency aim for the household sector in the review of the climate change programme later this year, and in the 2007 review announced in the energy White Paper action plan. If we find that we can go further than we set out in the action plan, we will do so.

Brian White (Labour, North East Milton Keynes)

Many industries in the sector are in the market for investment at the moment. Will my right hon. Friend assure them that they will be taken into account when the climate change review is under way, and that there will be constant dialogue with the industry?

Patricia Hewitt (Labour, Leicester West)

I am happy to give my hon. Friend that assurance. One of the best ways for us to ensure that we deliver our energy efficiency aims is to involve the industry. It is at the leading edge of energy efficiency technologies, and can help make sure that we design a regulatory framework—and take other action to deliver the results that we want—in the cheapest and most effective way.

In the context of delivering affordable and low-carbon heating, combined heat and power can make a significant contribution. Again, we have set ambitious targets. A recent analysis by Cambridge Econometrics suggests that we are likely to be within 1.5 GW of our target by 2010. In other words, there is still more to do.

Just yesterday, my hon. Friend the Minister for Energy, E-Commerce and Postal Services and my noble Friend the Under-Secretary of State with responsibility for food, farming and sustainable energy met key partners engaged in the CHP industry to discuss the long-term options for increasing the support that we give to CHP. We remain committed to our target, and we have a strategy in place for achieving it, which we published alongside the White Paper annual report earlier. We will continue to monitor progress, and to work with the sector to see what more we can do.

Renewable energy is a source of some controversy, in this House and elsewhere. After just two years, the renewables obligation is proving popular with both investors and developers. It is backed by £350 million in capital grants and research and development support for those renewable technologies that are still some way from being commercially competitive.

Alex Salmond (Scottish National Party, Banff and Buchan)

In the Secretary of State's opinion, does Ofgem act in accord with the Government's renewables targets in everything that it does?

Patricia Hewitt (Labour, Leicester West)

We had extensive discussions with Ofgem in the preparation of the energy White Paper. I am quite satisfied that Ofgem fulfils its statutory duties, as laid down by Parliament, and that it takes into account our commitment to deliver on our climate change goals, and on all our other goals, through an increase in renewable energy.

Alex Salmond (Scottish National Party, Banff and Buchan)

In that case, why were two Ofgem officials unable to give an answer to that very question, which I and my hon. Friend the Member for Angus (Mr. Weir) put to them three times during a meeting yesterday evening?

Patricia Hewitt (Labour, Leicester West)

I speak to the chairman, chief executive and other members of that authority, and I am satisfied on that matter. The members of the authority are well aware of the need to support renewable development, both through an appropriate regulatory framework and through ensuring that the necessary infrastructure is put in place to enable renewable electricity to connect to the grid.

Brian Wilson (Labour, Cunninghame North)

Perhaps I can help my right hon. Friend, as we both know that there are two approaches to renewables, and especially to those that come from peripheral areas. The Ofgem approach is that it does not want to touch them with a bargepole, as it is not interested in them. The Government approach is to encourage renewables, particularly in those parts of the country where the resources are at their best. It is admirable that the Secretary of State has recognised the problem and tried to bridge it with the capping proposal. Should she not, even in the dying breaths of this Bill, take that logic further and remove the sunset clause, which limits capping to 10 years? That at least would ameliorate what Ofgem has tried to do in the past year. It would be greatly welcomed and would be a positive signal to renewables rather than a negative one.

Patricia Hewitt (Labour, Leicester West)

My right hon. Friend has played a sterling role in supporting renewables both in his role as a Minister and now in his present position. As he rightly says, we recognise the need to make a further change in the legislative framework. That is why we have taken the power in this Bill to cap transmission charges for remote renewable generators. We did so under the European renewables directive.

My right hon. Friend raised the issue of the 10-year sunset clause on this provision. I should stress that the clock will start to run only when we start to use the power. It is our judgment that 10 years will be adequate for any remote renewable generators to benefit because transmission charges are only one cost to the generator. We believe that, as the renewables industry becomes established, the costs will decline. We have seen that happen with onshore wind farms and we will see it happen with offshore wind farms. If 10 years proves inadequate and there is a need to address the matter again, that can be tackled by the Government of the day.

Brian Wilson (Labour, Cunninghame North)

There is not much dividing us here, but this is so important. Ten years is not enough of a signal to investors in major projects in many parts of the country where renewable resources are greatest. It would be a relatively modest change for my right hon. Friend to give herself the flexibility to vary the terms of the sunset clause rather than putting 10 years in the Bill. If she had that flexibility, someone—

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

Order. I really do think that the right hon. Gentleman's intervention is rather lengthy.

Patricia Hewitt (Labour, Leicester West)

I understand well the point that my right hon. Friend makes. We have discussed it on a number of occasions. The important thing is to recognise that the power that we have taken in the Bill for a 10-year cap on the transmission charge, if that proves necessary, comes on top of the extensive support that we are giving to the renewables sector through the renewables obligation, which will amount by the end of the decade to some £1 billion a year of support as well as the £350 million programme of capital grants and R and D support to which I have already referred. I do not think that our enthusiasm for the renewables sector can be challenged in any way. We are certainly putting our money, or the taxpayer's money, where our mouth is.

Calum MacDonald (Labour, Na h-Eileanan an Iar)

I accept the point that my right hon. Friend makes. The incentives are equally available to all developments throughout the United Kingdom, but there is a particular problem with the peripheral areas such as my constituency, which will be meeting these high charges. The point needs to be made that it is a question of encouraging banks and other institutions to provide lending for well over a 10-year period. Therefore, the sunset provision creates a danger that banks will be put off investing in those areas of Scotland where the resources are at their very best and the economic impact is potentially the greatest.

Patricia Hewitt (Labour, Leicester West)

I absolutely understand my hon. Friend's concern. He has been assiduous in promoting the possibilities for renewable technology, especially in his constituency. It is precisely the argument that he and my right hon. Friend the Member for Cunninghame, North (Mr. Wilson) have made that has persuaded us to take the new capping power in the Bill. It applies only to the remote peripheral areas. We have discussed that carefully with the sector, and my judgment and that of my colleagues is that, on top of the already extensive incentives and grants, a 10-year capping power—with the possibility of further extension if necessary—will do what is required to encourage the development of the industry in my hon. Friend's constituency and in other parts of Scotland. However, other issues arise, especially in connection with the planning regime. I had the opportunity to discuss those issues in Edinburgh yesterday with the First Minister. I know that he and my right hon. Friend the Deputy Prime Minister will continue to play their part in ensuring that the planning regime is favourable towards the development of renewables, because it can be another barrier to the full realisation of that sector's potential.

We seek to create an entirely new energy sector that will provide the cleaner, greener energy that consumers undoubtedly want and help to give our country and our economy the diversity that we need to ensure security in energy supply. This is a market-led solution, but with Government intervention to ensure that the market develops. It is working. We see Centrica planning to invest £750 million in renewables. RWE Innogy ION has attracted £400 million of investment from the City for its renewable energy projects. The City is showing its confidence in the sector, and that is good news.

Bob Blizzard (Labour, Waveney)

One of the problems that the renewables sector faces is the approach that the Opposition have adopted during the passage of the Bill. They have tried to set up one obstruction after another to the development of offshore renewable energy. They say that it is intermittent and expensive, and they seem to want to give a power of veto to one sort of pleasure boat on the establishment of wind farms. We have seen this before—the Opposition say that they support renewable energy, but not offshore wind generation.

Patricia Hewitt (Labour, Leicester West)

My hon. Friend makes his point with great force—

Gwyneth Dunwoody (Labour, Crewe and Nantwich)

May I just point out that far from referring to one pleasure boat when we talk about wind farms in shipping lanes, we are talking about major shipping lanes around the UK that are an extremely important part of our economic development?

Patricia Hewitt (Labour, Leicester West)

My hon. Friend makes an important point. We have looked very carefully at the report from her Select Committee and we will respond to it. Indeed, we have had a valuable debate on it. We took all such interests into account when we originally designated offshore areas as potential sites for offshore wind farms, including shipping interests; radar and other defence interests; and environmental concerns, including nesting of particular species of birds. All of those partners have been carefully involved in our plans for developing the sector and I do not minimise the difficulties.

I shall be interested to see where the Opposition end up on the issue. Will they support the development of renewable power that will make a hugely important contribution to our energy supplies in future, or will they line up with those who think that the future lies only in nuclear energy?

Alex Salmond (Scottish National Party, Banff and Buchan)

The Secretary of State appears to agree with the hon. Members for Waveney (Mr. Blizzard) and for Crewe and Nantwich (Mrs. Dunwoody), but they argued diametrically opposed positions. Genuinely offshore wind power might be the answer that reconciles those positions, but under the Secretary of State's sunset clause it will become impossible to make the necessary billion pound investments, such as in the Beatrice field in the Moray firth. Scottish generators were promised a better arrangement that would reduce connection and interconnector charges. However, the Secretary of State's proposals, which Ofgem helped to draw up, could actually result in generators in the north of Scotland paying more under the new system. How can that be fair, equitable or just and how will it help renewables and other forms of generation?

Patricia Hewitt (Labour, Leicester West)

That matter was dealt with pretty extensively at earlier stages of the Bill and is one for Ofgem to decide. It is examining the issue extremely carefully with both the National Grid Company and the industry and I have no doubt that they will make the right decision and that we shall get the infrastructure as well as the generation investment that we need.

Finally on renewables, I remind the House that last December my hon. Friend the Minister for Energy, E-Commerce and Postal Services announced measures to increase the obligation to 15.4 per cent. by 2015–16 and to continue that level of support until 2027, providing exactly the long-term framework that is needed.

There has been much debate on the future of nuclear energy. There is no change to our policy and I echo the comments of my right hon. Friend the Prime Minister when he appeared before the Liaison Committee last week. Although he acknowledged the carbon-free benefits of nuclear power, he emphasised the point that the public still need to be persuaded both of its safety and its economic viability.

The plants that currently provide a rather important share of our total electricity are coming to the end of their life, building new stations is economically unattractive at present and we have yet to resolve serious issues relating to the disposal of nuclear waste. Alongside those issues, the Government have always recognised the importance of supporting the social and economic development of west Cumbria, which is so dependent on our nuclear industry and the skills of our excellent work force.

Tony Cunningham (Labour, Workington)

I thank my right hon. Friend for restating the Government's commitment to the economic and social development of west Cumbria, and also for establishing the West Cumbria strategic forum. It is important that the forum meets quickly, so can my right hon. Friend tell us when it will meet for the first time? Will local groups and local partners be involved, especially the local councils—Cumbria, Copeland and Allerdale? Their involvement will be vital to the success of the proposals.

Patricia Hewitt (Labour, Leicester West)

I am grateful to my hon. Friend not only for making that point but also for his work supporting the establishment of the West Cumbria strategic forum. It will indeed involve not only Whitehall Departments with a direct interest in west Cumbria, but also regional partners, including of course the Northwest Development Agency, and local partners, especially the local authorities of Cumbria, Copeland and Allerdale, as well as local community groups. Obviously, the nuclear decommissioning authority will also be represented.

I confirm that I shall be chairing the first meeting of the forum and that it will take place in early October. It will bring national focus and energy to bear on the long-term strategic issues that west Cumbria faces. We remain completely committed to supporting the Northwest Development Agency and its delivery bodies as the prime regeneration agency for the area.

Once the nuclear decommissioning authority is up and running, it will provide long-term strategic direction for the clean-up of our civil nuclear sites and will have responsibility for safety, security, environmental protection and value for money. It is the major achievement of the Bill and we all, on both sides of the House, want to see the NDA established by April next year, and the new electricity trading arrangements for Great Britain implemented in the same time frame.

In conclusion, I repeat my thanks to hon. Members from all parties for the constructive and positive approach they have taken to the scrutiny of the Bill. I have no doubt that we have a better Bill as a result of that scrutiny, building on the pre-legislative scrutiny that began in January 2003. Our improvements to the Bill will enable the NDA to engage in environmental schemes in local communities and we have set out in much more detail the scope of the annual reports required under the Sustainable Energy Act 2003. We have built in flexibility to deal with the effect of transmission charges on remote renewables generators—the problem we have just been discussing. We have given Ofgem a statutory duty to have regard to the principles of best regulatory practice. We have given more flexibility to customers on pre-payment meters to vary the terms of their supply agreements.

The Bill is an extremely important part of achieving those big energy goals that we set ourselves in the energy White Paper. I am grateful to all hon. Members for the consideration that they have given to the Bill, and I commend it to the House.

Stephen O'Brien (Conservative, Eddisbury)

I welcome this Third Reading debate. The substantial elements of the Bill have our support, not least because of the extent to which it was revised and improved by the Opposition teams in the other place, where it was introduced and subjected to rigorous and expert scrutiny under the leadership of my noble Friend Baroness Miller of Hendon, and during debates here in Committee and on Report, which were expertly and responsibly conducted by my hon. Friend the Member for Tewkesbury (Mr. Robertson). Not for the last time this evening, I record my enormous gratitude to them for their positive contribution, and, indeed, to all members of the Standing Committee, particularly those of the official Opposition, who made important, cogent and expert contributions then and today. I pay tribute to the unfailing courtesy of the Minister for Energy, E-Commerce and Postal Services, who was responsible for steering the Bill through the House.

The principal effect of the Bill will be to extend to Scotland the electricity trading arrangements for England and Wales, by replacing NETA with BETTA, and to establish a structure to safeguard and manage the clean-up of Britain's nuclear legacy, by establishing the nuclear decommissioning authority and a civil nuclear constabulary.

The Bill follows the 2003 White Paper, "Our Energy Future: Creating a Low Carbon Economy", which sets out the four goals of the Government's energy policy: to put ourselves on a path to cut the UK's carbon dioxide emissions by 60 per cent. by 2050; to maintain reliability of energy supplies; to promote competitive markets in the UK and beyond; and to ensure that every home is adequately and affordably heated. Measured against the Government's criteria, which I have just recited, no doubt, to their pleasure, the Bill substantively deals with only one of the four declared policy goals: the promotion of competitive markets.

Given that energy Bills are a relative rarity, the Government must concede that the Bill represents something of a missed opportunity, particularly in the context of the urgent need to address the challenge of climate change without jeopardising long-term access for the UK to safe, reliable and affordable energy supplies. That is not to say that none of the measures in the Bill is constructive. Many such measures were inserted at the Opposition's behest. Among the new clauses added to the Bill since Second Reading, I particularly welcome new clause 5, which secures the Government's concession to a commitment to make an annual report to Parliament on the availability of short-term and long-term energy supplies, to which I shall return in a moment, and which was secured only on the instance of and after protracted negotiations with the Opposition teams in both Houses.

I acknowledge the merit of introducing the renewable transport fuel obligation, although I note that the Secretary of State is merely awarding herself powers without specifically proposing to use them. Still on renewables, I welcome the amendment to clause 100 on duties in relation to navigation that prevent installations of offshore wind turbines in areas where they would interfere with international shipping lanes, although it is an inferior replacement to the similar amendment originally inserted in the other place under the authorship of Lord Jenkin, whose experience in energy matters is beyond dispute. I commend amendment (b) to Government amendment No. 5, which was agreed to during the last minute nod-through that we suffered in the guillotine on Report and successfully secured by the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) to help to safeguard shipping.

I am pleased that the Bill contains a clause on microgeneration, noting again that its presence in the Bill is another triumph for the Opposition. However, we must wait to study the details of the strategy before we know how serious the Government are about promoting it. I welcome the fact that the Government have agreed that copies of the nuclear decommissioning funding account should be laid before Parliament, and I pay tribute to my colleagues, particularly my hon. Friend the Member for Tewkesbury, for securing its inclusion.

Notwithstanding those positive improvements and additions, the Government's reluctance to address the wider policy goals that they identified in the White Paper has been an enduring theme during the Bill's passage through the other place and then on Second Reading, in Committee and on Report. The most notable instance of the Government's aversion was seen during the flurry that followed the insertion of the so-called security of supply amendment by Opposition Members in the other place, which tried to formalise in statute the Secretary of State's responsibility for setting a framework that would enable markets to deliver energy supplies over the medium and long term. Ministers opposed that suggestion by claiming that such a clause would usher in re-nationalisation of the industry. I made it crystal clear on Second Reading that the Conservative Government liberalised energy markets in the teeth of blind opposition from the Labour party of the day, and Conservatives do not have an ounce of nationalising blood in them, unlike several Labour Members. In the same breath, the Government went on to argue that the provision would be unnecessary, and thus flawed, because it simply restated a clearly recognised reality. The logic of those claims was cancelled out when the Government made them simultaneously, but the individual claims do not stand up to close inspection either, especially when examined in conjunction with the Government's response to a similar provision in the constitutional treaty to which they, if not the energy industry, British business or the British public, are keep to sign up. Article III-157 of the constitution states that for the first time the Commission will henceforth take charge of policy to

"ensure security of energy supply in the Union".

I note that the United Kingdom Offshore Operators Association called on the Government in October 2003—forlornly in the end—to make conceding that co-competence a red-line issue.

The Minister for Energy, E-Commerce and Postal Services told the European Scrutiny Committee on 2 December 2003 that

"the fact that there is an Energy Chapter"

in the constitution

"in itself is something that we are happy with."

He may be happy that energy policy will be a co-competence between the democratically elected UK Secretary of State and the unelected EU Commission, but he has not explained during the passage of the Bill—or at any other time—the effect that that will have on Ofgem's present duties to regulate the UK energy market or the Secretary of State's duty to negotiate bilateral treaties with non-EU Governments on, for example, the building of gas pipelines, let alone the possible powers of the Commission to intervene in our domestic energy markets.

While I am on the subject of the European Union, will the Secretary of State give us a categorical assurance in relation to the Bill that the nuclear decommissioning authority will not run into difficulties with the competition commissioner? Is she entirely satisfied that the Bill is in line with EU rules on state aid? If she does not want to intervene on that point now, will she consider the matter and write to me, placing a copy of the letter in the Library of the House?

Bob Blizzard (Labour, Waveney)

Will the hon. Gentleman give way?

Stephen O'Brien (Conservative, Eddisbury)

Very briefly, because the hon. Gentleman has already had a go—it did not work then.

Bob Blizzard (Labour, Waveney)

As chair of the all-party group on the offshore oil and gas industry, I have had several discussions with that industry. Everyone in the industry has told me that they are more than happy with the wording of the new energy chapter, which was negotiated by the Government. Indeed, I have received letters setting that out precisely. The industry is not unhappy with the new wording of the energy chapter.

Stephen O'Brien (Conservative, Eddisbury)

I am grateful to the hon. Gentleman for telling me what he has heard, but I have naturally held my own consultations on the matter, as he would expect, and we are receiving representations of a different character. The interpretation of what the Government have agreed—I am glad to say that it has not yet been agreed by the British people—has yet to be determined, so we must wait to see what happens. I suspect that the record will show that the argument was not as clear cut as the hon. Gentleman hopes, against all expectations.

The fact that there is an energy chapter in the European constitution makes an annual report on the availability of supply of electricity and gas in the UK all the more vital. Again, I pay enormous tribute to the work of my colleagues in the other place, especially my noble Friends Baroness Miller of Hendon, Earl Attlee and Lord Jenkin of Roding, and Members of this House, not least my hon. Friend the Member for Tewkesbury, who deserves special recognition, for using their patient negotiating skills to secure the commitment to that annual report. They also secured numerous other key amendments that I shall not have time to cover, which have improved the Bill immeasurably.

I must put it on the record that we have experienced the Government's habitual practice of tabling important and serious amendments on Report at the last minute, despite the fact that many could, and should, have been tabled much earlier in the process to allow full scrutiny. Additionally, they have yet again imposed a deliberately mean timetable on the House, which has meant that important groups of amendments, especially those tabled by the minority nationalist parties, have been excluded from debate, although their consideration would have formed an important part of the Bill's passage. The annual report does more than any other aspect of the Bill to put pressure on the Government to pay due regard to their role in setting the medium to long-term framework through which markets remain able and are further enabled to deliver security of supply.

That is important, because the Government's record in that respect is suspect. On their watch, normal operative standby has fallen sufficiently low to provoke concerns among academics and industry experts, as well as in a recent report from the other place. They have refused to rule out the possibility of blackouts as soon as this winter. Our nuclear reactors are mothballing, to the extent that they will contribute just 2 per cent. of our energy supply in less than two decades. The contribution of renewables to the energy mix has remained disappointing, at 2 to 3 per cent. since 1997.

With every passing day, the hole in the nation's energy mix looms closer—it is debated whether there is a low or high probability—and every day, the Government's response is to set an ambitious or stringent new target. Two headline examples from last year's White Paper are the commitment to cut carbon emissions by 60 per cent. by 2050 and the pledge that renewables will contribute 20 per cent. of our energy supply—at least, that is now the aspirational target—by 2020.

The Government also want to achieve at least 10,000 MW of installed, good-quality combined heat and power capacity by 2010, despite the fact that they have opposed an Opposition clause tabled in another place, which my colleagues have sought to influence them to reinsert, that sought to exempt CHP when determining the electricity from a supplier that is subject to the renewables obligation. The Government have a poor record in encouraging the CHP industry to invest. Striking that clause from the Bill will do little to encourage investor confidence, and still less to help the Government reach their CHP target for 2010, which it is currently estimated they will miss by 20 per cent.

Needless to say, the Government are on target to miss their targets, but given their record, they are also on target to move their targets—downwards only, of course. Meanwhile, the energy intensive users group has recently calculated that electricity prices will be pushed up 40 per cent. by 2010 because of the EU carbon emissions trading scheme. We are also set to become net importers of gas for the first time. That is not inherently a concern, but we may be relying at times on supplies from unstable or distant parts of the world.

We are still waiting for legislation that will produce a strategy for moving towards a low-cost, low-carbon, balanced mix of energy supply. That is the big elephant in the Chamber that the Bill does not seriously address. Indeed, members of the public with an interest in energy matters, of whom there are now many more than there were a few years ago, may read the Bill and wonder why it has so little to say about the topics driving public concerns about energy supply.

For example, since Second Reading, important contributions have been made by a range of parties, including Lord Browne of Madingley, Professor James Lovelock, the originator of the Gaia theory, and even, in the past few days, as the Secretary of State mentioned, the Prime Minister himself. Those contributions have, at the very least, sought to highlight the challenge of climate change and the range of options for supply in the future, not excluding the need for a debate about new nuclear build.

As the Prime Minister put it, nuclear power must be on the agenda

"if you are serious about climate change."

That reflected the statement by Professor Lovelock, which has set a tough challenge for those who regard themselves as seeking exclusively to push green credentials. Why, then, is the issue not on the Prime Minister's agenda? Why were the only references to keeping open the option of new nuclear build contained in amendments tabled by the Conservative party but struck out by the Labour Government? Why did last year's White Paper, which the Prime Minister described as a "milestone" in energy policy, make only a passing reference to keeping the nuclear option open?

As I confirmed on Second Reading, my party and I are happy with that approach. For the avoidance of doubt, and given that the Minister for Energy, E-Commerce and Postal Services kept suggesting that we did not have a policy, I point out that the Leader of the Opposition has said on the record, and in terms, that nuclear energy will be a vital part of future energy and electricity supply.

Stephen Timms (Labour, East Ham)

On Second Reading, the hon. Gentleman said that his party was neither for nor against nuclear power. Does that remain the position, or has it changed since Second Reading?

Stephen O'Brien (Conservative, Eddisbury)

I would have thought that the Minister, who usually has a good memory, would recall my words. I not only said that I had an open mind, but put it on the record that the Opposition, too, were completely happy with the idea that the nuclear option should be kept open—something that the Government have been saying. As has been mentioned, we have given an assurance that nuclear energy will be a vital part of energy policy under a future Conservative Government. That is a lot clearer than what we have heard from the Government.

We are keeping the nuclear option open while our present facilities are run down and the number of qualified nuclear scientists in the UK diminishes. I pay tribute to the former Energy Minister, the right hon. Member for Cunninghame, North (Mr. Wilson), for his speech, which I was able to catch on the monitor. He said that we must ensure that we do not lose our capacity for new nuclear build through the flight of the necessary engineers and scientists whom this country has developed and retained in the past, thereby gaining competitive advantage. That significant point gave reality to the idea of keeping the nuclear option open. Last but not least, why did the Secretary of State for Environment, Food and Rural Affairs tell us to

"come back in another generation"

if, in the national interest, we need to debate new nuclear power generation?

Neither the public debate nor today's debate have focused only on nuclear energy—far from it. A series of prominent figures, including the environmentalist, Sir David Bellamy, and the editor of The Ecologist, Zac Goldsmith, have expressed concern about wind turbines on environmental and aesthetic grounds. At the same time, Jorgen Abilgaard, director of Econ, which acts as consultant on wind and renewable energy for the Danish Government—Denmark's proportion of wind power is the highest anywhere in the EU—says of wind power that

"it is not a long-term solution to any of the problems of climate change".

It is alarming that the White Paper and, to a lesser extent, the Bill, choose to focus so exclusively on wind power as the long-term replacement for carbon-based fuels. Clearly, wind has an important role to play in meeting the UK's renewable energy targets, but in the face of growing public opposition, Ministers are deluding themselves if they believe that it is the unique solution to making the transition to a low-carbon economy.

We might have had the chance to explore some of these issues had the Liberal Democrats not called a rather unnecessary Division just before the end of Report, perhaps to avoid the exploration of their own embarrassment over wind turbines, which they seem to favour, because they are renewables, so long as they are not in Liberal Democrat-held constituencies. Wind turbines are unsightly to growing numbers of the public, and their power generation is worryingly intermittent. They are also uneconomic, as is reflected by clause 177 on the adjustment of transmission charges.

Alex Salmond (Scottish National Party, Banff and Buchan)

On a point of order, Mr. Speaker. In terms of the rules and Orders of the House, is any protection offered to Scottish Members who have waited to debate vital Scottish matters, such as the biased use of system charges and the question of renewables for the north of Scotland, only to find that the Government's contemptuous use and abuse of procedures and unwillingness even to listen to debate on these matters leave us in a position whereby they are not being aired, let alone voted on? Is that an argument for removing them to the power of a Parliament that might find the time to debate them?

Michael Martin (Speaker, Glasgow Springburn)

That is not matter for the Chair. I would say to the hon. Gentleman that it is not a matter of calling Scottish Members, but of calling Members of the United Kingdom Parliament. I am bound by the rules that the House has given me, and those rules say that these proceedings stop at 7 o'clock. I have no powers to stop any hon. Gentleman, although I do say, while I am on my feet, that Front Benchers should bear in mind that there are Back Benchers in this House of Commons.

Stephen O'Brien (Conservative, Eddisbury)

I am grateful, Mr. Speaker. I am sympathetic to the position of the hon. Member for Banff and Buchan (Mr. Salmond), but I note that I have not taken nearly as long as the Secretary of State, and these points need to be debated on equal terms.

I am not convinced that the Government have made much effort to inform consumers of the financial cost of wind power that is designed to be passed on to them. I commend the amendments tabled by Lord Jenkin of Roding in the other place—sadly, they were ultimately unsuccessful—because they would have required greater transparency and public consultation.

The Government need to be aware that they are giving the impression that their energy policy is getting lost in internal disputes. The message from the Minister to wind power companies is to "go out and build", while Professor Howard Dalton, chief scientist at the Department of Environment, Food and Rural Affairs, says:

"Wind power can make a contribution but do we really want windmills all over the countryside and covering swathes of the ocean? I don't think so."

He goes on to describe them as an "eyesore".

The Prime Minister tells us that he has "fought long and hard" with his party

"to make sure that the nuclear option is not closed off".

He said that only the other day. However, I fear that the content of last year's White Paper and this Bill suggest that the Secretary of State for Environment, Food and Rural Affairs must have fought even longer and harder.

We support the provisions to promote more competitive markets. We support the nuclear decommissioning authority and the new Government commitment to prepare an annual report on availability and security of supply with an accompanying debate on the Floor of House, as the Minister for Energy, E-Commerce and Postal Services previously promised and confirmed today. We shall hold the Government to that, and we look forward to the debate, subject to the receptiveness of the Leader of the House to granting it in Government time each year.

Robert Key (Conservative, Salisbury)

Will my hon. Friend confirm that we also support the civil nuclear constabulary? It was most unfortunate that chapter 3 received so little attention in Committee and that we have not had the opportunity to debate it this afternoon. It is extraordinary that the jurisdiction of the civil nuclear constabulary will be reduced. It will be less able to look after our nuclear industry in future than in the past.

Stephen O'Brien (Conservative, Eddisbury)

My hon. Friend makes an important point. We welcome the new civil nuclear constabulary. I pay tribute to the shadow Minister for Homeland Security, who has assisted greatly in providing advice, as well as to my hon. Friend the Member for Salisbury (Mr. Key), who brought his expertise to the debate. It is regrettable that we could not explore some of the issues in greater depth.

The Government have alighted on the right questions in their White Paper. However, Ministers are clearly at loggerheads over the solutions to reducing carbon dioxide emissions while ensuring the reliability and affordability of energy supplies. We do not fundamentally object to the Bill. We broadly support its contents, as far as they go. However, we do not pretend that it papers over the fault lines or, indeed, the movement of plates in the Government's uncertainty and indecision about the way in which to execute their clearly stated broader energy policy goals.

Calum MacDonald (Labour, Na h-Eileanan an Iar)

Given that we are running against the clock, I shall try to be as brief as possible. Although the Bill has huge merits and I was proud to serve on the Committee that considered it, a question remains at the heart of clause 177. We debated it in Committee, but we did not emerge from the debate much the wiser about the reason for the need for a sunset clause. The worries expressed in Committee have become more serious in subsequent weeks. For example, Scottish and Southern Energy representatives have approached me to say that they believed that their discussions with Ofgem and the national grid were heading towards a reasonable conclusion, but they are now going backwards. They are worried about the viability of investment in renewables in the north of Scotland.

Such worries are even greater for communities that have decided to venture into renewables. Several communities in Scotland are developing community-owned operations, which will maximise the benefit to the local community as well as contributing to the national need. They are especially dependent on long-term financial backing. Such finance will be much harder to get with the 10-year horizon, beyond which lies uncertainty about the user charges that affect those companies.

I want to make two requests of the Secretary of State and the Minister. First, will they urge Ofgem to accept the need for a fair, reasonable and stable set of charges that will allow renewables to develop even in the most peripheral parts of the north of Scotland? The issue should be resolved as quickly as possible to provide some certainty to the industry.

My second request is whether the Secretary of State and the Minister would be willing to meet a delegation from not only my constituency but from Orkney and Shetland, and to discuss the matter with the hon. Member for Orkney and Shetland (Mr. Carmichael) and me. A delegation from the island communities would be especially useful, given the vast resources in those communities and the fact that they will be most affected by the uncertainty that remains at the heart of clause 177.

Andrew Stunell (Liberal Democrat, Hazel Grove)

We support the Bill. It has more vision and ambition than it originally possessed, and I am delighted that the Lords have managed to impose on it security of supply, the renewables transport fuel obligation and microgeneration requirements, which the Government had omitted. Plenty more could and should be done, and we shall come back to the Government time and again to ask for an ambitious energy policy, an implementation plan that works and a long-term vision.

Question put and agreed to.

Bill accordingly read the Third time, and passed, with amendments.