Energy Bill

Public Bill Committee, 11 March 2008.

Further written evidence reported to the House

Clause 79

Sir David Amess (Conservative, Southend West)

I remind the Committee that with this it will be convenient to discuss the following: New clause 1—Smart meters—

‘(1) The Secretary of State shall make regulations which require smart meters to be installed for gas and electricity in all homes by the end of a specified period of ten years from the date on which the regulations are made.

(2) In this section a “smart meter” means a gas or electricity meter with two-way communication capabilities including communication capability to a display which illustrates household usage and cost per unit consumed.

(3) Regulations made under this section must be made within a period of 12 months beginning on the date on which this Act is passed.’.

New clause 2—Information on ETS allocations—

‘(1) Companies involved in the generation of electricity must publish information in their Annual Reports on the amount and value of any allocation they have received from the EU ETS and the amount that has been paid for such an allocation.

(2) Companies failing to publish the information required under subsection (1) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding level 5 on the standard scale.’.

New clause 4—Information on contributions towards environmental taxes—

‘(1) The Secretary of State shall make regulations requiring energy utilities companies to specify the proportion of those consumers’ energy bills that contribute towards environmental taxes.

(2) In this section “environmental taxes” means—

(a) the Renewables Obligation Certificates,

(b) charges resulting from the EU Emissions Trading Scheme, and

(c) charges resulting from the Carbon Emissions Reduction Targets and future additional environmental charges.’.

New clause 20—Implementation of new metering arrangements—

‘(1) The relevant licensees for the purposes of this Part are—

(a) gas suppliers and gas transporters within the meaning of Part 1 of the Gas Act 1986 (c. 44); and

(b) electricity suppliers and electricity distributors within the meaning of Part 1 of the Electricity Act 1989 (c. 29).

(2) The effective date for the purposes of this Part is the date which is 10 years after the date on which section 79 comes into force.

(3) Expressions used in this Part have the same meaning as in Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.

(4) As from the effective date, a relevant licensee must not supply gas or electricity to any premises that is not subject to the provisions of this section.

(5) The Secretary of State may exempt any relevant licensee from the prohibition imposed by subsection (4) in relation to such premises, for such period of time, and subject to such conditions as he considers appropriate in all the circumstances of the case.

(6) References in this Part to new metering arrangements are to arrangements (including the provision and operation of any necessary communications and data-handling infrastructure) designed to ensure that, by the effective date, all premises supplied with gas or electricity in Great Britain will continue to be so supplied through a meter that conforms to the following three requirements—

(a) that the meter must record and be able to store measured consumption data for multiple time periods;

(b) that the meter, either on its own or with an ancillary device, must facilitate remote access to such data; and

(c) that the meter must meet any specifications that may be set out in any regulations made by the Secretary of State under this Part, pursuant to his duties under Part 1 of the Gas Act 1986 and Part 1 of the Electricity Act 1989, for the purposes of facilitating the introduction of new metering arrangements.

(7) This section may not be brought into force before 1st January 2010.

(8) The Secretary of State may, in accordance with this section, modify—

(a) the conditions of a particular licence held under section 7(1) or 7A(1) or (2) of the Gas Act 1986 or under section 6(1) of the Electricity Act 1989;

(b) the standard conditions of licences of any type mentioned in those subsections

if he considers it necessary or expedient to do so for the purpose of securing the implementation of the provisions of this section.

(9) The power to make modifications under paragraph (a) or (b) of subsection (8) includes powers—

(a) to make modifications requiring licence holders, or classes of licence holder, to cooperate together, under arrangements approved by the Authority;

(b) to make modifications requiring any relevant licensee to take or refrain from taking any specified action, whether in relation to premises supplied with gas or electricity or otherwise;

(c) to make modifications relating to the operation of, access to, or use of pipe-line systems and distribution systems; and

(d) to make incidental, consequential, or transitional modifications.

(10) Before making modifications under this section, the Secretary of State must consult the Authority, the holder of any licence being modified, and such other persons as he considers appropriate.

(11) Subsection (10) may be satisfied by consultation undertaken before, as well as by consultation undertaken after, the commencement of this section.

(12) Any modification under subsection (8)(b) of part of a standard condition of a licence shall not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.

(13) Where the Secretary of State modifies the standard conditions of licences of any type under subsection (8)(b), the Authority must make the same modifications of those standard conditions for the purposes of their incorporation into licences of that type granted after that time.

(14) The Secretary of State must publish any modifications under this section in such manner as he considers appropriate.

(15) The power of the Secretary of State under this section may not be exercised after the end of the period of five years beginning with the passing of this Act.’.

New clause 21—Reports on meters—

‘The Secretary of State shall, in each calendar year following that in which this Act is passed, lay before Parliament a report on—

(a) the number of smart meters that have been installed in that period, including their effect on reducing carbon emissions and fuel bills;

(b) the discussions he has held with energy supply companies about—

(i) pre-payment meters,

(ii) the number of such meters in use, and

(iii) their tariffs;

(c) the progress that has been made in reducing carbon emissions through—

(i) increased use of renewable generation, and

(ii) energy conservation measures in households;

(d) the discussions he has held with energy supply companies about the impact of pre-payment meters and their tariffs.’.

Steve Webb (Liberal Democrat, Northavon)

Good morning to you, Mr. Amess, on our final lap. The distance of 5,000 m is not quite a marathon, but we have had an enjoyable canter around some important issues. I have read the transcript of our discussion on smart meters that began last Thursday afternoon and that we shall continue now, and I very much agree with a lot of what the hon. Member for Wealden said when he introduced his new clauses. I am speaking to new clause 20 tabled in my name and that of my hon. Friend the Member for Cheltenham. It relates to the same issues.

By way of context, it is worth saying that, notwithstanding the evidence that we received about the potential merits of smart meters, they are not a panacea. They are not a silver bullet; they are not the answer to everything. In an intervention in the speech of the hon. Member for Wealden, the Minister talked about a sober cost-benefit analysis. I would never expect anything other than sobriety from him, and I am sure that we shall have plenty of that this morning.

We want to give the industry and the consumers certainty. For example, I had a meeting last night with a representative of a major energy supplier, who told me two things that made me think. I said, “You are replacing meters every day. Are you putting in smart meters?” The answer was, “No, of course, we aren’t.” I said, “Why not? Everyone will have a smart meter sooner or later, so why don’t you start doing it now?” The spokesman said, “Which smart meters would we put in? We could put one sort in. Another company could put another sort in, and then the Government finally legislate and could specify a different standard or set of criteria. We will then have to rip out our smart meters because they are the wrong sort. Until we know what we should be doing, we cannot start. It is not as though the procedure will happen slowly; it needs co-ordination.”

The second thing that the spokesman said startled me. He stated, “We are putting in 10,000 new meters each day.” That is an awfully fast speed to be running in the wrong direction because within 10 years, presumably, they will all have to be ripped out and replaced by smart meters. That is ludicrously wasteful. Meters have to be replaced, so surely we now need decisions from the Government. Matters could largely be market driven. There is an issue about how much the Government should be involved in the process, but surely they should be kicking it off and setting the rules of the game at the very least. Some of the new clauses would achieve that position.

Several members of the Committee, including the hon. Member for Southampton, Test, attended a smart metering breakfast at which such issues were discussed at length. The companies are saying that smart metering makes sense for perhaps a third of their customers, and that they are economically viable and commercially attractive. However, they say that there is no real commercial incentive for a lot of customers. As for the benefits of smart meters, the hon. Member for Wealden talked on Thursday afternoon about how smart meters could assist the scope for microgeneration, but that is of no great interest to the suppliers. We, as policy makers, want that, but the suppliers would not get much out of it.

Suppliers will obviously make savings by not having to send the man with his cloth cap to read the meter, but they reckon that the cost of putting in smart meters would only be half offset by the savings made by not having meter readers or estimated readings. It will be interesting to hear the Minister’s figures because we hear anything from £5 billion to £15 billion, which shows a huge range of uncertainty. Clearly, someone will end up paying the bill. Although we might wish that it will purely be the shareholders of the companies, we sense that somewhere down the track the consumers will end up footing some of the cost. That is another reason why the whole process must be done at minimum cost. Given that is where we think we will end up, it needs to be mandatory, organised and structured.

As for getting from here to there, one of the big questions is whether we let the market do it, which I think is Ofgem’s position. I struggle with that idea, not philosophically, but pragmatically. Given that a street might have six or seven different providers and that an individual household might have different gas and electricity suppliers, dozens of white vans could be coming to that road sequentially or at different points in time. It sounds ludicrously inefficient to have individual companies maintaining their own meters for a household here and a household there. My instinct is to say that we should co-ordinate that.

People have talked about a regional franchise, but it would not have to be exactly that model, as long as there was some notion of co-ordination. There could still be, for example, competitive tendering for the franchise and a competition for who should install the meters in a particular area. There could still be an element of competition, but with some co-ordination, which would make the process far more cost-effective.

The reason that we have tabled new clause 20 is that, once the smart meters start being rolled out, there is a potential gain that has not been mentioned sufficiently. It could be the revolution in the energy market. A major complaint about the energy market is the perceived lack of competition. The Minister, understandably, will be cautious about that assertion, because Ofgem are examining the situation and the Competition Commission may be asked to consider it. However, smart meters could be the answer to competition in the energy market.

One of the current problems is the lack of switching between providers. The Minister and I shared a conference platform last Thursday afternoon at which the chap from the energy company said, “It is great. One in five people a year switch.” In fact, we know that poor households are less likely to switch provider and that half of the people who do switch, do so to the wrong company. That is not perfect market functioning in my view; there is not free and full information and competition.

I find the welter of different tariffs bewildering. I feel that I ought to have another look. I have not changed supplier for several years and it is about time that I did, but I cannot be bothered. I am not entirely sure which bill is relevant, and it is an estimate, anyway. The market is not fierce, vigorous and competitive. How could smart meters feature? Smart meters need to be two-way. They do not only measure consumption, but they feed back information. There is a communications element to them.

What if the smart meter, which knows everything about a household’s fuel consumption, were in a position to surf the net on their behalf and match their pattern of consumption against all the companies’ tariffs, and come back and say in a Stephen Hawking voice, “EDF would be good this month”, for example? It could do that perhaps once a quarter or twice a year—whatever the optimal period was—and say, “Right, I am going to switch you, because for the last three months you have been using tariff X, but company Y has come up with tariff Z, which would be better for you.” That would scare the pants off the fuel companies, which must be a good thing.

As an economist, I used to write essays about perfect markets. Their features were complete information, no transaction costs, and large numbers of suppliers. A smart meter that shops around on someone’s behalf would be the closest thing I have ever come across to a perfect market, because there would be full information that could be tailored to individual circumstances. Once the information was in, there might be no cost to the householder, because the technology of matching a set of consumption data to a set of tariffs—the companies could make their tariffs available in that format—could lead to optimal behaviour by consumers. Instantly, the excess profits of the fuel companies would be taken away. Instead of needing a windfall tax or anything similar, the smart meter could be the agent of making the domestic energy supply market truly competitive for the first time.

Stephen Ladyman (Labour, South Thanet)

The hon. Gentleman is absolutely right and he suggests an exciting scenario. When we were taking evidence on the subject, my hon. Friend the Member for Southampton, Test, and I were talking about it and the question arose of why the meter would surf the net only every month. Why would it not surf the net every minute or every second for the best available price? The retail electricity market would come to an end as a consequence, because we would all be buying direct from wholesalers.

Steve Webb (Liberal Democrat, Northavon)

I had not thought of abolishing the retail supply companies, but perhaps that is the logical progression. I have been out-lefted. How about that? I said perhaps once a quarter because there is a clear issue about payment. In other words, to be part of this, do I perhaps have to lodge my bank details with some clearing house, and then one quarter I am with this company and it has the right to take a direct debit from my account and the next quarter another company does? Imagine if that applied every second or every minute. That might be a pragmatic answer to the hon. Gentleman’s question. However, it is certainly an interesting idea that we could do away with the retail supply companies altogether. I will leave it to him to tell them that.

Alan Whitehead (Labour, Southampton, Test)

My hon. Friend the Member for South Thanet made a powerful point. There is the question of programming a device that looks at what the perfect supplier is. Therefore, in the hon. Gentleman’s scenario, the perfect supplier would be defined by the programme and therefore everyone would switch to it at the same time, creating chaos in the market rather than the simplicity that he suggests. The purpose of having a market at all is that imperfect information means that not everyone does the same thing all the time.

Steve Webb (Liberal Democrat, Northavon)

My suggestion of doing it quarterly for each individual—each individual’s quarter would begin on a different day—overcomes the problem that the hon. Gentleman suggests. On any given day, the vast majority of people might be automatically switched from company A, but company A would be out of business if by the next day it had not done something about it. If it was uncompetitive, it would have to do something about it. That is the power of the free market, he said, uncharacteristically. That is the attraction of the scheme—companies could not persist making super-normal profits without doing something about that.

My other point is that consumers are diverse and the best tariff for you, Mr. Amess, might be different to the best tariff for the hon. Gentleman. You might have different patterns of gas and electricity use, use your power at different times of day and night or be a small user or a big user. The companies will offer diverse tariffs because consumers are diverse, and so the situation will not be quite as dramatic as the hon. Gentleman suggests.

Alan Whitehead (Labour, Southampton, Test)

I want to gently point out the question of computers buying and selling shares and the effect that that has on world depressions and stock markets. The hon. Gentleman appears to be advocating a similar process.

Steve Webb (Liberal Democrat, Northavon)

I think that it was the hon. Member for South Thanet who was advocating precisely that process. I am suggesting something slightly more managed—for example, that once a quarter the meter does that sort of thing, with each person’s quarter starting on a different day to that of three quarters of the population, or whatever. Therefore, on each day presumably only a small percentage of the population would switch and that would send strong supply and demand signals to the companies, which would have to respond. That, to me, is what a competitive market would look like.

Anne Main (Conservative, St Albans)

I have been speaking about smart meters for some time. One of the things that concerns me about the scenario that the hon. Gentleman describes is where someone wants to indulge in green tariffs. Often a green tariff is not the cheapest, and if the programme always goes towards the cheapest tariff, it does not necessarily go for the greenest. Would the hon. Gentleman like to explore the possibility, for example, of having some sort of programmable device on the machine? Possibly, having consulted with whoever is supplying the meters, one could decide what sort of tariff one wanted from one’s meter. It might be the greenest tariff or it might be the cheapest one. One would therefore not have constant switching as a result of the machine permanently making the decision.

Steve Webb (Liberal Democrat, Northavon)

I am grateful for that intervention. The hon. Lady makes a perfectly good point. In a sense, the smart meter is as smart as one wants it to be. We need to beware of over-complexity. I can almost envisage that there might be a green button on the front of the machine, which someone who valued a green tariff could press, and the machine would then look for a green tariff. We need to keep it simple, but the principle is good.

Malcolm Wicks (Labour, Croydon North)

Presumably not a nuclear button.

Steve Webb (Liberal Democrat, Northavon)

If I respond to that intervention it goes on the record, but no, not a nuclear button.

I am taking us down this track—which I admit is probably a few years away— because the potential of the devices has probably been understated. The trouble is that we have not started the journey and it needs to be done in a managed way. The companies want to get on with it, certainly for some of their customers—they are champing at the bit—but the Government are holding them up. Perhaps things will change in a few weeks’ time, but we have not seen that yet.

Stephen Ladyman (Labour, South Thanet)

I arrive at a conclusion slightly different from the hon. Gentleman’s. The market is so exciting that perhaps we should approach it in an unmanaged way, because that is how markets work. Given the exciting potential futures that we have been discussing, the Government are right not to step in and do something now that would lock us into smart meters today. Perhaps it would be better if somebody said, “I will undertake to provide your electricity through a smart meter. I’ll provide the smart meter and make sure that the infrastructure is in place so that it is bought from the wholesaler at the best price at any particular second.” In other words, it should be left to the market to introduce smart meters, and the Government have got it right by not being prescriptive at this stage.

Steve Webb (Liberal Democrat, Northavon)

That is a thoughtful contribution, as I would expect from the hon. Gentleman, but it is actually profoundly wrong. The market works in certain circumstances, but the issue of interoperability is an example of the problems that can arise. If I got a smart meter from EDF and changed supplier to E.ON, it would be crazy if I then had to get a different smart meter, or if my original smart meter could not talk to different suppliers. That shows that there needs to be some sort of interoperability standard, but I also sense that the Government may be about to do what the hon. Gentleman is defending them for not doing, so I caution him about that.

Stephen Ladyman (Labour, South Thanet)

The Government do all sorts of things that I defend them for not doing. I was not suggesting that people would get their smart meter from E.ON or any other energy company: rather, I was suggesting that smart meters should be provided by a body that was more like Confused.com—in other words, one that was not related to the energy companies. Such a body would be responsible for providing the necessary infrastructure, and for dealing with interoperability issues. The customer would simply buy through that intermediary, from the supplier that was the cheapest at any particular second.

Steve Webb (Liberal Democrat, Northavon)

That is an interesting idea. The problem is whether the market that the hon. Gentleman describes would ever exist independently of the energy companies, given what we know about the stickiness with regard to switching. Even though all I need do is switch on my laptop, dig out a bill, type in my name and address and switch company, I cannot be bothered to do so. Also, an independent provider could sell me a smart meter, but what would be the advantage in that—the fact that it would shop around for me? Well, I can do that now, sort of, so I am not convinced that a freestanding market such as he describes would exist independently of the energy companies. Moreover, the questions of interoperability and so on would arise once the market was operated by the companies.

Charles Hendry (Conservative, Wealden)

The hon. Gentleman makes an interesting case, which I support. Does he agree that one reason why standards must be set by the Government is that smart meters should apply to both electricity and gas, and that that would not necessarily happen if left to the market? Secondly, the meters must allow for two-way flows, so that people can measure how much electricity or gas they are taking out of the system, and how much they are feeding into it, through microgeneration. If those standards are not set by the Government, there is a danger that there will be a massive roll-out of smart meters that are nothing like as smart as they could be.

Steve Webb (Liberal Democrat, Northavon)

I agree. A meter that does not answer back is not smart. There needs to be a two-way flow of communication.

I have gone on for longer than I intended, but I want to make a couple of other brief points. First, I am keen to hear the Minister’s thoughts on the interaction between smart meters and fuel poverty. Smart meters will not provide all the help that fuel-poor people need, and they could cause problems similar to those caused by pre-payment meters, otherwise known as poor-pay-more meters. It will be interesting to hear the Minister’s thoughts on that, given the Government’s lamentable failure on fuel poverty. The other day, I met someone who worked with the Minister in Brent back in the 1980s, and who said that he was a champion at tackling fuel poverty—

Malcolm Wicks (Labour, Croydon North)

Is.

Steve Webb (Liberal Democrat, Northavon)

Is—that is an interesting one. Does the Minister see smart meters as part of the answer to the Government’s catastrophic failure on fuel poverty? Will that be part of the solution, or will it be a neutral technology?

Albert Owen (Labour, Ynys Môn)

The hon. Gentleman is making an interesting case. He set off by saying that he was trying to simplify the market, presumably to help fuel-poor people, but he has made it sound even more complicated. At present, people find matters difficult because they cannot get online and they do not have the technology. What in his proposal will make that simpler?

Steve Webb (Liberal Democrat, Northavon)

I apologise if I have not made that clear. The point is that people with smart meters will not need their own laptop internet connections and so on, because the meter will do the work for them. Broadly speaking, poor people in particular do not switch often, but the smart meter system would switch them to the best tariff all the time—the machine would do it for them. That would be far better than relying on poor people having computer connections or shopping around. It would be simpler, as they would not actually have to do anything. As long as they consented to allowing the meter to shop around for the best tariff once a quarter, or whatever, they would always get the best price available.

Albert Owen (Labour, Ynys Môn)

I understand how the technology would work, but there is more to it than that. People would need a bank account and an arrangement with a company. That is the problem at present: poor people do not have access to the banking system or the internet. I do not understand how the information that they would receive would help them get cheaper fuel.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman makes two separate points, about access to banking and access to the internet. Access to the internet is clearly a problem and a barrier for poorer households, but it would not be an issue in the circumstances that I have set out. Those people who have bank accounts but no internet access, and who currently do not switch, would do so in my scenario. I accept that there is an issue about people who do not have bank accounts, but I suspect that the numbers of people who do not have any type of bank account that could be linked into the sort of system that I have described are relatively small. Also, rather than requiring people to give their bank details to every separate company, I suggest that that could be done through a clearing house.

I fully accept that the problem of people with no bank accounts is a bigger matter, but we should not fail to help some poor people just because we cannot necessarily help them all. My proposal would make progress in the right direction, but I accept its limitations.

The other question that I have not yet addressed is that of the potential environmental benefits of smart meters. As things stand, there is a risk of overstating the issue: the evidence shows that there is a one-hit saving—with people saying, “Oh, gosh!” and then turning a few things down—when meters are first installed. That one-hit saving is well worth having, but whether it leads to recurrent and ongoing savings is less clear, and I should interested to see the evidence on that.

Other countries are well ahead of us in this regard, but smart meters could help the environment if they were used to facilitate tariffs—along the lines of the economy seven idea—so that there was more time shifting of consumption. The grid would need less peak capacity at particular times of day or night and, for those of us who want greater use of renewables, that would be a good thing, as it would help with the integration of renewables into the grid.

I shall draw all those threads together. I began by saying that smart meters are not a panacea—that they are not a silver bullet, but that they are part of the solution. However, since we are going down the smart meter track, we need a clear Government announcement as soon as possible about what that track will look like. We need co-ordination to avoid waste, because the cost of six vans going down the same road will end up being paid for by the consumer. We need to be more visionary, in the way that I have described: instead of holding inquiries and investigations into an uncompetitive energy market, we should regard smart meter technology as part of the answer, and a way to ensure that we have a competitive market. That would mean that consumers and the environment would benefit, not just the companies.

Brian Iddon (Labour, Bolton South East)

I want to raise another concern about metering. As far as I am concerned, people can come and fit a smart meter for me tomorrow. I shall explain why, using gas as an example.

First, though, I must point out that I live in two places—here in London and up in my constituency—so I have two houses to organise. The other day, the gas meter reader came to my constituency house while I was here in London, and he pushed the card through the door. When I got back home, I looked for the contact number so that I could phone in the meter reading. I read the meter and came back to London with the card. Of course, the wrong reference number had been written on the bottom of the card. The suggestion was that I should leave the card on my doorstep, even though it was a wet and windy day. Now, where would that card have been the next day? It would have been down the road somewhere, so that is one problem with gas meter readers.

My biggest concern, however, has been with the electricity company that supplies my power. I know that the clause under consideration relates to gas meters, but electricity meters are relevant as part of the debate on smart meters, so I hope that you, Mr. Amess, will give me some leeway.

My electricity supplier used to be Norweb, then it was United Utilities and is now Powergen. I was lulled into a false sense of security because, when I was with the first two companies, I had a direct debit that was recalculated every year. The result was that I paid an elevated amount that took into account increased power charges, and inflation in general. However, in the three years that I have been with Powergen, that has never been done, and the consequence was that I found myself £1,000 in debt. My presence in London during the week meant that I might have responded a few days late to the cards asking me to phone in meter readings, but most of the time Powergen took no notice of the readings that I sent by telephone.

John Robertson (Labour, Glasgow North West)

I understand the problems that my hon. Friend has had with his energy company and, having seen some programmes on television, I can understand why he has had them, but he is not alone. Scottish and Southern Energy and Scottish Power have been just as bad as any of the other companies.

Brian Iddon (Labour, Bolton South East)

I realise that my problem is not unique, and that is why I am raising it this morning. I could afford to pay the £1,000 debt because I am working and have a good job, but we should think of all of those people who would not be able to pay it. The trouble is that the power companies—and Powergen is not the only one—no longer read the meters themselves. Instead, they use meter-reading companies that attempt to read them. Several years ago, power companies would insist on reading the meter at least once a year, and customers would make an appointment to ensure that they were in the house when the meter reader came. In that way, they could open the side gate and let the meter reader in, but that does not happen any more.

Also, meter readers make their calls very quickly. I have been in my house when a meter reader has called, only to see him disappearing down the road in the car before I even managed to open the door, greet him and make the meter available for reading. The fact is that meter reading is currently in a state of chaos with some power companies—although not all: I have no complaints about the company that supplies my electricity in London. They are not all the same, but Powergen is particularly bad. I wrote to Powergen, but I have never had a letter back. It is very bad at responding to customers’ letters about serious complaints such as this.

Charles Hendry (Conservative, Wealden)

Was the hon. Gentleman as surprised as I and others were when Allan Asher from Energywatch said in evidence to the Committee that one third of all bills are wrong because they are based on estimates? He made exactly the same point: that it is the most vulnerable and the poorest people who end up being in the most difficult situations as a result. It is a huge problem that one third of all bills are wrong.

Brian Iddon (Labour, Bolton South East)

The hon. Gentleman is absolutely right. I was going to point out that incorrect bills will cripple some of those people who have to manage day to day on the money that they receive, probably from benefits in many cases. It would be difficult for many people to find themselves even £20 in arrears, let alone £1,000. Admittedly, that debt arose over a three-year period, and it was partly my fault. I should have realised that the amount was not being updated and then altered the direct debit myself. I accept some of the blame, but I had been lulled into a false sense of security because the two previous power companies had made the necessary updates.

There had been several price increases during that three-year period. I asked Powergen to tell me how it knew, over that period, how much electricity I had used on each side of the price increase. It had no clue, of course. When it estimates its bills, I will bet my bottom dollar that the bill is estimated in its direction rather than mine. A smart meter that would immediately change the tariff when the power company decided to increase the price would have got me out of that problem, and it would do the same for all the poor people suffering the same difficulty. I implore my hon. Friend the Minister, particularly with the fuel poor in mind, to get these smart meters in place so that we do not have this continuing problem with manual metering. I apologise to all the manual meter readers, because they will be out of a job, but—and I shall probably get in trouble for saying this—the way that some of them read meters, they probably deserve it.

John Baron (Conservative, Billericay)

I raised the issue of smart meters in an Adjournment debate with the Minister. I do not wish to add a lot to that; points have been adequately made by both my hon. Friend the Member for Wealden and the hon. Member for Northavon, as well as in other contributions. There is a general desire to have a more meaningful roll-out of smart meters. I support new clause 1. I want to urge on the Minister again the importance of a meaningful timetable for a full national roll-out of smart meters.

We have heard about the advantages of smart meters. They can help us to wage war simultaneously on fuel poverty, energy shortages and climate change. Certainly, there are many figures to suggest the possible extent of savings. Perhaps one of the more reliable ones comes from the Energy Saving Trust, which estimates that UK homes are wasting more than £900 million a year simply by leaving appliances on stand-by—a staggering sum of money—and suggests that almost two thirds of us leave lights on in empty rooms. There are savings to be made, which is where smart meters can come into their own. They show consumers in real time and in some detail—we can debate the extent of detail that is required, but it is certainly enough to do the job—how energy can be used more sparingly. That, in turn, would help us to cut bills and alleviate fuel poverty.

Hugo Swire (Conservative, East Devon)

I clearly agree with everything that my hon. Friend is saying. I recognise that the technology is evolving the whole time and that it is far from perfect, but with some smart meters, it will be possible to access the use of power remotely. For instance, appliances that are not being used could be turned off remotely. In a sense, that will engender more economical use of energy.

John Baron (Conservative, Billericay)

My hon. Friend makes a very good point. There are many advantages to smart meters. The one problem is that the technology is still evolving—the Minister will refer to that—but that should not stop the Government taking a more meaningful approach and showing an element of leadership in the hope that smart meters can be rolled out in a more aggressive manner.

Hugo Swire (Conservative, East Devon)

The other point about smart metering, which I made last week, is that the technology also allows control over water usage. That is another form of wastage. Smart meters are multi-usage, regardless of whether the technology is quite where it should be yet.

John Baron (Conservative, Billericay)

I agree. The other aspect, which has been touched on by almost everyone who has spoken in the debate, is the extent to which smart meters could help the fuel-poor. Figures suggest that fuel poverty has risen significantly under this Government. As I pointed out to the Minister in the Westminster Hall debate, the decision to cut the budget for Warm Front by £300 million over the next three years will not help. With energy bills rising again in recent months and with the Government set to miss their own target of eradicating fuel poverty by 2010, such assistance is more important than ever.

I suggest to the Minister that a couple of other advantages to smart meters are worth considering. By providing more accurate information to customers and suppliers, smart meters would also bring an end to estimated bills and hard-working families would no longer be caught out by thinking that they were using less energy than they were. That point was raised by the hon. Member for Bolton, South-East—he developed it well, so I will not do so further.

To touch on another point, raised by my hon. Friend the Member for Wealden, smart meters could allow the introduction of a range of sophisticated tariffs, thus enabling vulnerable and elderly customers to take advantage of cheaper, off-peak rates. Without getting too complex about the method of access, smart meters would help to improve information flow, which can only make for better-informed decisions.

The Committee has discussed whether we ought just to allow the free market to advance the cause. We have an element of sympathy for that. However, looking at what the energy companies have said and, more importantly, done so far, it is clear that they are not prepared to make the massive investment needed to convert 40 million-plus homes across the country—a conversion that compares to decimalisation—without a clear mandate from the Government.

Whether the roll-out model adopted is the franchise model, which would give rise to concerns about allegations of anti-competitiveness, or whether a free market approach is preferred, strong leadership is clearly required from central Government. Such leadership is being shown in other countries; we see it in Sweden, Italy, Australia, the US and Canada, where smart meters are currently in operation. Britain cannot afford to lag behind other countries. Smart meters give energy consumers the benefits of information and choice, which increasingly characterise all aspects of the marketplace, and we cannot ignore that.

I suggest to the Minister another advantage of smart meters. They would combat any cynicism that suggests that individuals cannot make a difference to the overall argument about climate change and carbon emissions. Individuals would have the opportunity to access the information required to adjust their use of energy, which would make a direct difference, taken in total, to carbon emissions and the climate change debate. In effect, that would empower individuals.

All too often, individuals feel that they are on the sidelines, ineffective and unable to help in the overall discussion about energy consumption, carbon emissions and climate change. With this method, we can give them something—a means by which they could make a meaningful contribution. That should not be underestimated. Certainly, all the customers and individuals whom I have spoken to—as probably with other members of the Committee—want smart meters; they think that they would help them tremendously. Smart meters are a splendid idea. However, a national roll-out requires national leadership, which is why I hope that the Committee supports new clause 1.

Paddy Tipping (Labour, Sherwood)

It will not have escaped your notice, Mr. Amess, that new clauses 1, 20 and 21 all relate to smart meters. It will not have escaped the Minister’s notice, because he is as eagle-eyed as ever, that the majority of members of the Committee support smart meters. We will all consider with interest what the Minister says in responding to the debate. The hon. Member for Wealden, last week, and the hon. Member for Northavon have made the case for smart meters in terms of carbon reduction and prices.

My hon. Friend the Member for Bolton, South-East rightly said that one of the major complaints to energy companies and to energywatch relates to the fact that a third of bills are estimated. Tomorrow morning, I shall be confined to my home in London for a four-hour span, because someone has not read my meter for two years. I think that they think that I am fiddling it. I have to be there to let them in or receive a court order. It is an antiquated structure, and we must move to smarter technology.

An issue not raised in the debate and on which I think that the Government are weak is microgeneration. Smart meters can contribute in that respect, as they can measure the outflow as well as inflow of electricity. Microgeneration is an area of policy in which we need to make some progress. I look forward to the paper that the Government plan to introduce later this summer.

The discussion is not about the principle, because I understand that the Government are in favour of it. I always read with interest what the Prime Minister has to say, and he has come out strongly in favour in smart meters. A pilot programme is under way as we speak, on which it would be helpful if the Minister could give some specific feedback.

In particular, I should like the Minister to tell the Committee clearly whether legislation is necessary to introduce smart metering, as it is not entirely clear whether it is. Smart meters could be introduced by secondary legislation. As we know, the legislative peg could be made in the Bill. It would be helpful if the Government provided some clarity about the way forward and the leadership that has just been talked about.

I greatly support smart metering, and I think that it will happen. The debate on the principle is won, and we have now moved on to the debate about how to implement it, as has been said by the hon. Member for Billericay and my hon. Friend the Member for South Thanet. Unlike my hon. Friend, I think that there is a strong case for a regional roll-out, rather than a market approach.

Anne Main (Conservative, St Albans)

I hope I can share the hon. Gentleman’ optimism that smart metering will definitely happen. There is concern within the industry that the focus on electronic display devices that was given in evidence to the Communities and Local Government Committee might take our eye off the ball and prove a distraction to the roll-out of smart metering. It would be quite an expensive distraction if investment goes down that route, as it would mean that smart metering is either delayed or not implemented at all.

Sir David Amess (Conservative, Southend West)

I call Dr. Stephen Ladyman—sorry, Mr. Paddy Tipping.

Paddy Tipping (Labour, Sherwood)

I have lost a few years. I am grateful. Perhaps I have not greyed as much as I thought.

The hon. Lady makes an important point: we must move beyond a debate on visual display units, to one on the real technology. The focus of the argument has changed over the past 12 months, and she is right to say that VDUs could be a distraction. The view within the industry is that we should move to the more sophisticated technology.

Anne Main (Conservative, St Albans)

I am delighted that the hon. Gentleman decided to reply. However, his time scale of the past 12 months is not mine. Indeed, when the CLG Committee was discussing fuel economy, I asked about smart metering and the answer was, “Our EDDs are progressing beautifully,” and that was only about three months ago. So I am urging a note of caution and saying that I should like to receive a reassurance from the Department that smart metering, rather than EDDs, is the way forward.

Paddy Tipping (Labour, Sherwood)

Let us see what the Minister has to say when he responds to the debate. I should like him to set out clearly the Government’s position on smart metering and on timetables and signposts for the way forward. I should like us to have a realistic discussion about a market approach to installing smart meters, as opposed to a regional roll-out.

That is enough on smart meters, but before my hon. Friend the Member for South Thanet gets too excited, I want to draw his attention to the fact that clause 21 addresses more than smart metering; it introduces the notion of annual reports on prepayment meters and the discussion that the Minister should have with energy supply companies about social tariffs. That is a really important discussion. It was a live issue on Second Reading, and we should recognise that fuel poverty is an increasing consideration.

Let me be very straightforward: the Government have a good story to tell about the reduction of fuel poverty. They have made gains and changes, but the international market for fuel has worked against them. Put bluntly, the mandatory and statutory targets that the Government have committed themselves to—ending fuel poverty for vulnerable customers by 2010 and in general by 2016—will not be met. Prices are going up. Some people face price rises of 29 per cent. and others of 15 or 13 per cent. The process will continue, and every 1 per cent. increase in fuel prices brings another 40,000 people into fuel poverty. That is a real challenge for the Government.

From reading the press, I understand that the Government are on message about this issue. If we were discussing it in 26 hours’ time, the Budget might inform our thinking. I do not ask the Minister to comment on that, but he can comment on some of the principles. One of the principles is prepayment meters. I find it astonishing that 1,000 prepayment meters are being installed every day. That is a reflection of fuel poverty and the needs of vulnerable households. Even more staggering is the vast difference between the tariff for a prepayment meter and that for an online direct debit. On average across England, the figure is £225. It is clear that energy supply companies are benefiting from this. I accept that prepayment meters are more expensive and that more costs are involved, but according to my information the extra cost for the energy company is £85, not £225.

Clearly some of the poorest and most vulnerable members of our community are being ripped off. I want the Government to do something about that. That is why new clause 21 asks for an annual account from the Government showing what they are doing about prepayment meters. It goes further than that. Not all people in fuel poverty are on prepayment meters. Again, the estimates are a bit vague on this, but perhaps 25 per cent. of people in fuel poverty are dependent on prepayment meters. A large group of people will benefit from anything that is done about prepayment meters. That is why I invite my hon. Friend the Minister to set down on an annual basis his discussions with the energy supply companies. I understand that he has been meeting them frequently and intensely over the past few days with ministerial colleagues. I want to see some action.

As I said earlier, this Government have a good record and the Minister himself has an excellent record over a long period. If we want to meet our targets, we need to do much, much more. We need to have a discussion with the companies about prepayment meters. We need to keep the discussion going about voluntary social tariffs. Some companies, such as EDF or E.ON, provide excellent social tariffs, but others, such as npower, are very clear that they will only bring forward proposals if there is legislation.

The time for action is now. As the Prime Minister says, the Government are best when they are boldest. One of the greatest achievements of the Labour Government was to introduce a windfall tax. Let us look at the position of energy supply companies just now. Of course, they need money for investment. The energy industry is a rapidly changing scene, but it is clear that when organisations such as Ofgem—not the most radical body in the world—tell the Chancellor of the Exchequer that the energy supply companies have benefited from the £9 billion of carbon credits that they have not paid for, there is a strong case for firm action on prepayment meters and on social tariffs. One of the ways of financing that is to look again at a windfall tax.

Martin Horwood (Liberal Democrat, Cheltenham)

It is a pleasure to be serving under your stewardship, Mr. Amess, as we head into the final straights, with only a few more furlongs to travel and a few more hurdles to jump before we return to our constituencies. As long as the Government can assure us that we will be able to go back to our constituencies by Friday at 3.15pm, that will be great.

Hugo Swire (Conservative, East Devon)

Tomorrow at Cheltenham.

Martin Horwood (Liberal Democrat, Cheltenham)

I was referring to the Gold cup on Friday in particular, but today is the opening of the festival.

I anticipate that the Minister will welcome much of what has been said in favour of smart meters. Indeed, the Government’s White Paper on energy included a pledge to see households have access to the technology as soon as possible and, let us hope, within 10 years

“to enable them to control their emissions.”

However, the problem is not whether we are all in favour of this technology coming on stream and a roll-out taking place, but whether the Bill needs to mandate that. We have heard some visionary stuff, particularly from my hon. Friend the Member for Northavon. My only qualification to his enthusiasm for this perfect market is that I, along with the hon. Member for Bolton, South-East, would certainly want consumers to still be able to judge supplier companies on whether they had good green tariffs, on their ethical and environmental credentials and on how good their customer care was.

The question is whether the Bill needs to mandate the roll-out. As the hon. Member for Wealden said, a lot of the evidence that we heard was from organisations that said that we needed a mandate in the Bill, and that we could not wait for the kind of methodology that the Government have been suggesting until now. That was common ground for energywatch, which said that 70 per cent. of its complaints related to inaccurate billing, estimated readings and failure to bill on time—exactly the kinds of issues that the hon. Member for Bolton, South-East was referring to. With the kind of two-way communication that we are talking about, those problems would be removed at a stroke.

That point is common ground for the Energy Networks Association and the Energy Retail Association, a member of which—Centrica—said:

“Without a mandate from Government, it is highly unlikely that energy suppliers would be able to facilitate a roll out to 45 million UK households in the timescale envisaged.”—

that is, within 10 years—

“A mandate would give the industry the ‘green light’ it needs to initiate a coordinated and managed roll out programme.”

As my hon. Friend the Member for Northavon said, it is extraordinary that, in the meantime, the energy companies are fitting tens of thousands of old-fashioned meters every day. At the moment we are heading firmly in the wrong direction. Without such a mandate there is no specified methodology for the kind of two-way communication technology that would enable energywatch’s issues to be resolved and that would tackle the cost efficiencies that have been talked about with the energy companies, such as the removal of the process of meter reading, which would take them in a direction analogous to a telephone company in getting information from the system.

We should acknowledge the contribution of the Energy Networks Association to the drafting of new clause 20, which is much appreciated. The ENA refers to the recent consultation paper that the Department for Business, Enterprise and Regulatory Reform carried out, which proposed requiring the introduction of smart meters to certain segments of the business market. The methodology that DBERR suggested was to insert modifications into gas and electricity supply licences, using regulations made under section 2(2) of the European Communities Act 1972, pursuant to the provisions of the energy services directive. If that is the kind of model that the Government suggest we use, even if they were going to proactively pursue a roll-out, I fear that that would be inadequate. That is the view of the ENA, which says:

“We think that it would be risky to rely on section 2(2) regulations for a smart metering rollout, because the powers conferred by the Energy Services Directive are too narrow for the complex and demanding project that this entails.”

The directive does not have, for instance, the specific requirement that the technology has a two-way flow of information between supplier and household.

At the moment, the methodologies that the Government are looking at and have at their disposal are too weak. They are not sufficient to force the roll-out that we all want to happen. The Minister must tell us exactly why the matter should not be mandated under the Bill and why primary legislation cannot be used to give full and unambiguous force to our shared ambition.

Stephen Ladyman (Labour, South Thanet)

I am grateful to my hon. Friend the Member for Sherwood for implying that somehow I am a few years younger than him. I am not sure that that is true.

I am also grateful to my hon. Friend for drawing attention to prepayment meters; I wish to associate myself with his comments. When thinking about such issues, perhaps my hon. Friend the Minister should talk to his colleagues at the Department for Communities and Local Government who are reviewing the private rented sector at the moment. Many prepayment meters are installed in private rented dwellings and those with the least resources to pay the high fees that are often associated with such meters often live in such accommodation. We could do a lot of work in that direction, and replacing prepayment meters with smart meters could be a way forward.

If, after moving into private rented accommodation, people could easily enter their personal reference number to show that they were responsible for the bill racked up by the smart meter, that would be a simple way in which to ensure that people were responsible for their energy consumption. It would reassure landlords that they would not be left with bills and, more importantly, it would mean that people in circumstances of real fuel poverty would receive a little help.

No member of the Committee has opposed the principle of smart meters. Indeed, I have not heard anyone oppose it. As has been pointed out, smart meters have obvious benefits for the consumer. They provide, in particular, information to customers so that they can manage their energy use. However, the hon. Member for Billericay might have overstated the case. Unless someone comes up with a smart meter that can make my daughter turn off the lights, I am not entirely sure that the system will be as helpful as he suggested. Nevertheless, information is power and people can use it to reduce their bills.

Smart meters will deal with the problem identified by my hon. Friend the Member for Bolton, South-East about accurate billing and estimated bills. They might also mean that we can do away with having to pay a standard monthly fee by direct debit, because not only do we end up sometimes with big debts, but the company ends up with a big balance of credit that it does not deserve. There are obvious benefits to the consumer.

The hon. Member for Northavon referred to the benefit of smart meters in driving a new market. If the meters can check the market, whether each minute, second or month, a new market in energy prices will arise without doubt. A smart meter that provides information to a customer and allows smart billing is not only in the interests of the consumer, but the power retailer. A smart meter that allows a customer to change retailer is clearly not in the retailers’ interest so, left to their own devices, I suspect that the smart meters that will be rolled out will be those that provide information for energy efficiency purposes and allow smart billing, but not allow the process of a market-driven opportunity to change power retailers. I appeal to the Minister that, when he makes his announcement about smart meters, he makes sure that that part of the equation is mandated. I want him to insist that all smart meters have such a capacity because I cannot see the current market providing it of its own volition.

I also ask the Minister to think about the step beyond that I was trying to get at when I intervened on the hon. Member for Northavon. There might come a time when an entrepreneur wants to be able to replace the energy retailing companies completely. That is already happening. We see adverts on the television for companies such as Youswitch. Someone can log on to the internet and provide the details of their household power usage, and Youswitch will tell them which company gives them the best deal at that moment. Youswitch gets its money from those companies. It has an arrangement with them, and the company someone switches to pays Youswitch some money for providing the information.

The information that Youswitch needs is exactly the information that would come out of a smart meter. It seems, therefore, a small step for an entrepreneur such as Youswitch to say, at some point in the future, “We will do this for you. We will connect Youswitch to your smart meter and Youswitch will not only work out which is the cheapest supplier at the moment but we will also do the switch. We will send the information off to that company and say that Steve Ladyman now wants to buy his power from someone else.”

Therefore, in setting down the regulations that will eventually drive forward that market, I ask my hon. Friend the Minister to make sure that he also takes that potential into account, and that nothing he does prevents companies, such as Youswitch and Confused.com, from coming into the market and kicking out the electricity retailers and the gas retailers, or at least giving them a darned good kick in the pants, which—I am sure we all agree—they need.

Alan Whitehead (Labour, Southampton, Test)

I rise briefly to support new clause 21. I do not wish to add greatly to what was a series of persuasive points about why there should be the kind of reporting that is set out in the new clause. The suggested reporting gathers together a great deal of the discussion that we have had on a variety of issues regarding the future of energy supplies, on how energy supplies will change in the near future and the opportunities that that change presents us with. I have enormous sympathy with my hon. Friend the Minister regarding the number of issues—issues concerning how that change will come about—that are liable to be on the agenda for discussion with the energy companies.

We have discussed, for example, making sure that smart meters enable switching. There is also the issue of the extent to which energy supply companies might develop into energy service companies. An energy company, or even a different kind of company, might develop the idea of taking over the responsibility for the supply of energy to a household, based on the contract to invest in the ability to supply that energy at the best possible price over a period of time. That implies that the energy company would undertake elements of investment in that house, either reactive investment by making the house more energy efficient, or proactive investment by installing, perhaps, microgeneration, which would enable a two-way meter, by exporting energy, to give the household further reductions. However, the proceeds from the export of energy would be shared with the energy supply company, as part of the overall contract. That contract would fit in with the idea of smart meters, so that how the contract was shared could be properly calculated.

I can see a further market developing in terms of how those contracts might roll out. There could be a version of meta-meter reading, measuring what exactly the share is between the customer and the energy service company, as a result of the contract that has been entered into. That would look at how that share relates to the return on the investment that the service company has made and to a reasonable return for the customer over a period of time, compared with what they were previously paying for energy supplies. That makes it doubly important that there is an accurate baseline for what the customer was previously paying. The situation that a number of hon. Members described, in which the majority of energy suppliers probably do not have an accurate picture of what the customer is liable for and what they pay at any one moment, is potentially a severe difficulty with regard to that new energy economy.

I draw attention not only to those developments, but to the role played by social tariffs within that structure, in conjunction with action on energy efficiency and on how energy supply can be permanently reduced in price in an era of rising energy costs. With regard to social tariffs, I have been caused a little chill by recent comments made by precisely those energy companies that perform well on social tariffs, suggesting that the voluntary nature of the social tariff arrangement may cause them to have second thoughts about their own social tariff structures, because they have to report to their boards about what they are doing. As a result of the voluntary arrangement, there could be circumstances in which those companies feel commercially exposed because other companies are not following the same route—it is clear that there is now a broad gap between the performances of the various utility companies as far as social tariffs are concerned.

Because of that, some companies suggest that they may reduce or—in some recent comments that I have seen—even remove their voluntary social tariff arrangements, if the level playing field, which it was anticipated would develop as a result of actions on social tariff, does not emerge. In an era of substantially rising energy costs, there must be a great temptation to duck out of a voluntary arrangement on social tariffs in order to maximise the return to the company. It is therefore important to have a level playing field on social tariffs, and there should be regular reports on how that is coming about and what progress is being made. I appreciate that those discussions may not be easy, and that it may require some form of legislation to ensure that we have such a level playing field.

It would be welcome if the Minister could clarify for us the circumstances under which smart meters might be introduced, and those under which a genuine level playing field, with the reporting as suggested in the clause, could be achieved. Perhaps he could also tell us whether that would be done through primary legislation, secondary legislation or other measures, and, whether a combination of social tariffs and a single tariff for those people who use prepaid meters could be achieved on the basis of present legislation as it stands.

Malcolm Wicks (Labour, Croydon North)

This has been a genuinely interesting and useful debate. I am relieved because—contrary to what the public might think; that a politician loves nothing more than the sound of his own voice—almost inevitably, I have spoken for rather too long during the Committee proceedings and it has been nice to hear other voices on such an interesting topic. The hon. Member for Northavon has always suffered a certain fate in the House because, as one of the genuine intellectuals with a distinguished academic background, he has occasionally been called “an anorak”. I have always thought that to be grossly unfair and indeed offensive. Now that we have learned that he has a rich social life, a hinterland, far away from his portfolio, and that he attends smart meter breakfasts, I hope that his reputation is restored.

Before the Committee, at an unearthly hour, I had to speak to an American-European conference on electricity. They were all piling out of a “burnt-toast breakfast” which, as I was partly speaking about the importance of energy efficiency, did not go terribly well. I was not clear why one would want burnt toast.

The debate is not just about smart meters. There are other issues to address, although I will come to smart meters later in my speech. I will remind the Committee what the clause is about—I can do that briefly—before dealing with the new clauses. The clause transfers existing statutory responsibility for the technical aspects of gas meters from the Office of the Gas and Electricity Markets, known as Ofgem, to the Secretary of State.

By way of explanation to the Committee, I will set up a background to the transfer. Ofgem is the independent, economic regulator of Great Britain’s gas and electricity market, whereas the National Weights and Measures Laboratory—the NWML—is an agency of the Department for Innovation, Universities and Skills, exercising a range of statutory functions relating to technical matters on behalf of its Secretary of State. The NWML has a remit to ensure that UK measurements are accurate, fair and legal. In support of that role, the laboratory has responsibility for the standards and accuracy of a wide range of measuring instruments used by businesses for trade purposes, including weighing machines, petrol pumps and water meters.

The functions transferred under the clause are about the technical specification of meters, rather than the economic regulation of energy markets. As such, those functions are not a natural fit with Ofgem’s core role of economic regulator, but fit well with the laboratory’s functions relating to other measuring instruments used for trade purposes. The clause is a necessary part of transferring the legal metrology, part of Ofgem’s gas and electricity metering functions, to the laboratory. Specifically, it transfers to the Secretary of State functions that govern the approval and stamping of gas meters.

The proposed statutory transfer follows a successful administrative transfer of functions and staff from Ofgem to the laboratory back in April 2006. That transfer received support from stakeholders, with agreement that the administrative transfer would be made permanent through the first available legislative vehicle—this is the first available vehicle. At the appropriate stage, I will move that the clause stands part of the Bill.

We will resist new clause 2 for the following reasons. The hon. Member for Wealden has suggested a new clause pertaining to the EU emissions trading scheme. I assume that the new clause is drafted to identify the so-called windfall profits of the companies participating in the scheme, so let me talk briefly about the EU ETS before addressing the draft new clause specifically.

The ETS was launched in 2005. In its first phase, which ended last year, companies were allocated carbon credits, which could be traded, establishing a market for carbon. It was a very ambitious, perhaps revolutionary, scheme, which undoubtedly faced some problems in that first phase, most of which were widely publicised. For example, we recognise that generators have profited from the emissions trading scheme. However, we in the UK and the EU learned from those problems and have used the experience to improve the scheme. Phase 2, which began in January, reduced the overall allocation of carbon credits and raised the expected price for carbon for 2008 to 2012 to around €20 per tonne. The UK has put all the burden of emissions reductions on the generators, and required them to buy many of their allowances.

We are in discussions with the Commission about the EU ETS post-2012, which will be phase 3 of the scheme. The current proposals have an EU-wide central cap, with a clear and predictable downward trajectory to 2020 and beyond. There will be a move towards higher levels of auctioning, addressing the issue of windfall profits. This will maintain the price of carbon and reduce emissions well into the future.

Steve Webb (Liberal Democrat, Northavon)

Just on a factual point, because I think I have misunderstood. Did the Minister say that we have required generators to buy most of their permits? My understanding is that they have been given virtually all of them. Did I mishear what he said a few moments ago about generators and permits?

Malcolm Wicks (Labour, Croydon North)

I will clarify that later if anything is still unclear. I was talking about phase 2, but I shall return to it. The improvements to the EU ETS should themselves address the problem of windfall profits.

I will now speak about the proposed new clauses more specifically. As I am sure the hon. Member for Northavon already knows, the amount of carbon allocations that companies receive is already published on the website of the Department for Environment, Food and Rural Affairs. Likewise, the market price for the allocations is already published. Requiring the generators to publish that information would therefore create duplication and an unnecessary administrative burden. The amount paid for the carbon allowances that the generators buy from other EU ETS participants is not published as it is commercially sensitive information. The generators are not, for example, expected to publish the price that they pay for other things, such as coal, gas, oil and the rates that they pay their contractors.

I hope that I have explained why I do not think that the new clauses would be helpful and why the steps being taken in the UK and in the EU more widely will help to tackle the issue of windfall profits, maintain a robust carbon price and reduce our carbon emissions by 2020 and beyond, so I hope that hon. Members will not seek to press their new clauses.

I am also resisting new clause 4, although I am grateful to the hon. Member for Wealden for tabling it, because it relates to the transparency of environmental measures on energy bills for domestic consumers, which is an interesting issue. Certainly, empowering individuals and helping them to make informed choices about their use of energy is a key part of the Government’s strategy to drive energy efficiency in the home. Indeed, the hon. Gentleman will be well aware that those issues were a central theme of the saving energy chapter in the Government’s 2007 White Paper.

Committee members will want to be assured that we have already taken action, and I am thinking especially of DEFRA’s Act on CO2 campaign and the information and assistance offered by organisations such as Warm Front and the Energy Saving Trust. In the White Paper, we also pledged to help consumers to monitor and reduce their energy consumption through the inclusion of historical information on their energy bills or statements. As part of taking that important work forward, my Department recently concluded a consultation on metering and billing, and our response will be published shortly. It is worth pointing out, however, that responses to the consultation did not indicate a strong appetite for including additional information of consumers’ bills.

The new clause proposes that energy suppliers should be required to report on the proportion of a consumer’s bills that contributes towards environmental taxes, highlighting in particular the renewables obligation, the ETS and the carbon emissions reduction targets. I am sure that Members will appreciate that each of those environmental support measures are not taxes in the traditional sense. Moreover, companies have a number of different ways to meet their obligations under the three schemes to which I have referred. They include making energy efficiency savings in the home, generating renewable electricity, paying a buy-out penalty and trading variable priced instruments.

Therefore, to break down specifically the proportion of a consumer’s bill that is attributed to those mechanisms would impose additional and potentially significant administrative and cost burdens on energy suppliers, especially given the complexity involved and the range of different routes to compliance. In addition, how suppliers cover the costs of their activities, including the cost of any environmental obligations, is a commercial matter that is not disclosed to Government, or indeed to Ofgem.

Since the hon. Member for Wealden, I hope, is not suggesting that we lower or remove the environmental support measures—I am sure that he is not—it is not clear how the additional information proposed in the new clause would bring significant benefits to customers. Moreover, I do not believe that any additional benefits that might emerge from the new clause would outweigh the potential administrative and cost burdens that it would impose on the energy suppliers.

Although I agree with the overall sentiment of the new clause, particularly with regard to increasing transparency for consumers, I believe that our current focus on working with energy suppliers to improve the quality and accuracy of billing information is the right one. Improved billing information, combined with the other information and support available from Government, energy suppliers and organisations such as the Energy Saving Trust, should help consumers to make more informed choices about their energy use. In turn, that should encourage them to take steps to save energy, for example, by improving the energy efficiency of their homes or by turning appliances off, rather than leaving them on standby. I hope that hon. Members will not press these new clauses.

Charles Hendry (Conservative, Wealden)

The Minister has been doing his best to respond to the points that I have raised here. There are some aspects of a bill that consumers, through their own actions and by using energy more wisely and more efficiently, will be able to reduce, but they will be surprised to discover that their bills do not necessarily go down as they might have hoped. Other aspects of their bill will be increased because of the environmental charges and levies that are imposed on the energy companies. Is it not reasonable that the consumer should understand the ebbs and flows in this situation and what is driving bills up as well as down? Is it not their right to understand what contribution they are making towards the environmental charges?

Malcolm Wicks (Labour, Croydon North)

Two things are true. As I have been arguing, doing it very precisely per customer is quite a complex task. That is the advice I have received. However, alongside the major reasons why energy costs are rising, which are global, environmental policies such as the ETS and the renewables obligation, which we more or less all support in the House, are adding to costs. Indeed that could well increase proportionately in the future.

We are about to report on this, but if, as part of any future billing, there is some broader brush way to indicate to customers what these costs now amount to—I am not talking about the specific figure per customer—we should be prepared to look at it. Looking at each company and each customer would be too complex and too administratively difficult to consider, but the broad point is one on which I am happy to agree with the hon. Gentleman.

Hugo Swire (Conservative, East Devon)

We hear a lot about eco-towns and eco-home targets in terms of new house building, but do the Government have any plans to include smart metering in any new build from any date? Would that be a standard requirement?

Malcolm Wicks (Labour, Croydon North)

I am coming to smart meters in a moment. Certainly, it seems inevitable and right that smart meter technology will be part of the development of eco-towns and zero carbon dwellings. The principle has to be right.

The Member for Northavon asked me about the ETS. I will look at the record again, in case I have confused him. Under phase 2, we are able to auction some of the EU ETS allowances. Within the limits or that ability, we have imposed the burden that this implies in terms of the total number of allowances we can auction on the electricity generators, rather than on the industrial installations, such as cement factories, which more directly face global competition on their business. Perhaps I should talk to him outside the room. If he would like more information about where we are on ETS, I should be happy to provide it.

Steve Webb (Liberal Democrat, Northavon)

I think the Minister is saying that in the second round 10 per cent. can be auctioned and the Government are going for 7 or 8 per cent. In the Government’s mind, they have charged the companies for most of what they could have done. The point surely is that the other 90 per cent. has been given away. That is the distinction between what he said and what is really going on.

Malcolm Wicks (Labour, Croydon North)

Certainly in phase 3 we will move towards far greater auctioning and therefore avoid some of the serious difficulties with windfalls that have arisen and have concerned many in the House.

I now move on to smart meters, the issue that has attracted most attention in the debate. We had some serious contributions from the hon. Member for Wealden last Thursday and today from many members of the Committee. It shows the strong interest in this. A number of new clauses have been tabled and perhaps I can start with a little anecdote. Shortly after I became Energy Minister for the first time, about two years ago, an environmental body—I have forgotten which—wrote to a number of us, including shadow Ministers, to say, “We would like to install smart meters in your home. If you would accept them, it would show that you were keen and it would help us.” Some of us signed up to that; I certainly did. For various reasons, the smart meter never arrived, but that is beside the point. I do not think that it was anyone’s fault in particular.

The anecdote relates to the story from the hon. Member for Northavon, because, meanwhile, the supply companies were replacing the old technology. My supply company, which did not know about the smart meter, wrote to me as an ordinary customer to say, “We need to come and replace your meter.” I phoned them up and said, “Actually, that would be a waste of money”—I am making the hon. Gentleman’s case to some extent—“because I am about to have a smart meter.” I said it rather smartly, but I hope not too smugly.

I thought that the company had taken that on board, but, sure enough, they wrote to me a few weeks later saying, “We haven’t heard from you. We need to come and replace your meter.” I tried ringing them again. That went on for several letters; I kept saying, “No, no, I am going to have a smart meter.” They then wrote to me saying, “Please, you have not responded to us; we need to replace your meter. Mr. Wicks, we have to tell you that under section XX of the Electricity Act XXXX, if you do not co-operate, we will have to take you to court.” I thought that it would not be terribly smart for the Energy Minister to be taken to court under one of the sections that I had been reading out endlessly in the Committee, so I had to let them come and put in the meter. In a way, I make the point for the hon. Member for Northavon. I will return to those matters a little later.

I hope that the Committee will be aware that, in the energy White Paper, we highlighted the potential benefits of smart meters for both consumers and energy suppliers. Many Committee members have reminded us of those benefits. The hon. Member for Northavon has waxed lyrical about all sorts of potential benefits. They certainly include giving consumers better information to help manage their energy use; providing accurate bills, which will please my hon. Friend the Member for Bolton, South-East, who is clearly frustrated by what happens at the moment; and potentially providing easier access to a wider range of tariffs.

On my hon. Friend’s point, it is a legal requirement for energy suppliers to inspect meters and to ensure that consumers have an accurate meter reading at least once every two years. That is a licence obligation enforced by Ofgem. I agree that smart meters could help in that context. That is one of the benefits we are considering in our impact assessment. That legal right may help my hon. Friend when he is discussing the matter with his energy company. I will not follow him in commenting on that honourable group of meter men and women. We must keep him away from the topic of hospitals in case he starts commenting on other professionals.

Brian Iddon (Labour, Bolton South East)

To be fair to Powergen, it is now ensuring that my meter reading is accepted. It rings me up if the meter reader cannot gain access, so I think that it has taken the message on board now.

Malcolm Wicks (Labour, Croydon North)

It is excellent to hear a good outcome. Part of this discussion reminds me of my advice surgeries on a Friday evening. I am glad that my hon. Friend is now happy.

For suppliers, the benefits include reduced costs, which is a significant benefit to them, through remote meter reading, for example; better customer service, through accurate billing; and the potential to switch consumers between tariffs. For all those reasons, the energy White Paper made clear our ambition for smart meters to be rolled out.

Stephen Ladyman (Labour, South Thanet)

I just noticed my hon. Friend’s careful wording. I cannot remember whether it is the same wording that was in the White Paper, but he is talking about the ability to switch between tariffs, rather than companies.

Malcolm Wicks (Labour, Croydon North)

Let me come back to that. I will just express a few words of caution, however. I agree with the hon. Member for Northavon, who said that smart meters were not a panacea. At one stage, he was in danger of talking the thing up—if I can paraphrase by way of understatement his lecture on the matter. Most of our judgments about such meters, including that of the hon. Gentleman, is that we need a wide range of matters in respect of energy efficiency and to move towards the concept of energy services companies and so on to tackle the problem. I sometimes think that people see the process of smart meters as a panacea, whereas it is one among 10 or 12 things that we probably need to do.

I also wonder whether our enthusiasm about smart meters is occasionally a little ahead of their technological capability. We can all add potential benefits to the smart meter, but I would need to take more advice about what is technically feasible. I do not think that anyone has ever said that the smart meter could monitor our blood pressure and predict football results or the outcome of the next general election, but there is a danger of moving towards a science fiction world. [Interruption.] I can advise the hon. Member for Wealden about one of those later. Let us try to keep the matter in context.

Since the White Paper, the Government have consulted on the policy options for a smart meter roll-out, and we are in the process of considering the responses that we received. We are also nearing completion of a detailed economic impact assessment of the benefits and costs of a domestic smart meter roll-out. I remember asking the hon. Member for Wealden for his estimates of the cost because it is obvious that we need to look at both sides of the balance sheet.

A domestic roll-out of smart meters will involve the replacement of 45 million electricity and gas meters in each home in Great Britain. Well, not every home has 45 million meters, but the Committee will catch the tenor of my remarks. It will be a major undertaking, with estimated costs in the range of £10 billion to £20 billion—there is room for debate about that—over whatever the roll-out period will be. Yes, there are major benefits, including economic savings; nevertheless the costs, by any measure, will be quite considerable. A range of highly complex technical, legal and policy variables will also need to be considered and resolved before final decisions can be taken.

Anne Main (Conservative, St Albans)

I thank the Minister for that information. What per-unit cost does he have in mind for smart meters? Given that we have ones that can predict general elections and take blood pressure, and others that are more simple, on what unit cost is the hon. Gentleman basing his figures?

Malcolm Wicks (Labour, Croydon North)

Let me make a little progress, and then I will be able to see where we are on such matters.

Having said that we could be talking in the region of £10 billion to £20 billion, we are analysing and understanding the issues involved, including the further testing of some estimates and assumptions with industry and others. Our aim is to establish an approach to smart meters that will deliver the maximum range of benefits as cost effectively as possible. The scale and complexity of such challenges must not be underestimated, and so it is right that we take appropriate time to do the work before making a final decision about the way forward. We are nearing completion of the process and I can inform the Committee that we expect to publish the Government’s consultation response and the impact assessment later this month.

I wish to underline the complexities. In answer to the hon. Member for St. Albans, the unit costs will depend on what we want the thing to do. Although I jested slightly about the monitoring of blood pressure, some ideas involve a very smart, highly IQ’d meter and the costs will therefore vary. I am advised that the responses to our consultation indicated a broad range of costs, ranging from £17 for an electricity meter at one end of the continuum to £80 at the other. The equivalent guesstimate for gas meters was a range of £28 to £100.

However, the cost of each smart meter is only one aspect of the total roll-out cost. As a comparison, I am advised that what is described here as a “dumb” electricity meter—it will rise up in protest at that description—costs around £7, and a dumb gas meter some £18. That is just an example, but I hope that we will be able to give more information in due course.

In what was a genuinely interesting speech, I thought that the hon. Member for Northavon was making my case for me when he talked about the complexities and the possibilities going forward. Although it would be nice to introduce smart meters now, we have to get to grips with the issues. What do we want the things to do? The more ambitious one gets, and the more that technology allows one to do some of those upmarket fantasy things that the hon. Gentleman suggests, the more expensive the meters become and the more important it is to get such an expensive roll-out right.

Brian Binley (Conservative, Northampton South)

The Minister talks about the range of abilities that smart meters might have. If he can find one that prophesies football matches, perhaps he will let me know where I can get it. There is an opportunity here for consumer choice, and I wonder if that was taken into account. The nation clearly requires certain abilities from smart metering, but consumer choice could an help to alleviate the costs involved. Is that within the remit of the Minister’s thinking, and part of what he intends to do? If not, will he consider it as a possibility?

Malcolm Wicks (Labour, Croydon North)

Yes, I will. The fact that meter men and women do not need to call will bring undoubted benefits to the industry. I hope that those people will be redeployed—perhaps they could install the smart meters. Empowering the consumer must be at the heart of the smart meter roll-out.

I wish to clarify a point on which my hon. Friend the Member for South Thanet picked me up earlier. He said that there was no mention that switching between suppliers was a benefit, but I can reassure him that that is a potential benefit of smart metering. We are considering it alongside the costs and benefits and the logistics of the project, and I hope to be able to say more about that.

I hope that the Committee will understand that resisting the new clauses is not a sign of the Government stepping away from our ambitions for smart meters. We will say more about that later in the month. It is a signal of how seriously we take the issue and of our determination to take the time to do everything necessary to ensure that we get the policy right from the outset.

Charles Hendry (Conservative, Wealden)

Does the Minister have a view as to whether a national roll-out of smart meters would require legislation? If so, the Bill would seem to be the appropriate vehicle to facilitate that, as at some subsequent stage he could use it to put in place the necessary secondary legislation. The consultation process will begin at pretty much the same time as discussion of the Bill is ending. It would be unfortunate if its conclusion that there should be a national roll-out came too late for the necessary provisions to be included in the Bill.

Malcolm Wicks (Labour, Croydon North)

I understand that argument, and we will be reporting soon on exactly what we want to do. However, I am advised that the difficulty is that, until we can make a proper judgment about that, we will not be able to determine the sort of enabling power that we will need.

I suppose that that is logical, and it depends on what we want to do. An existing European directive might give us all the legislative cover that we need but, if we want to be more ambitious about the technology, we might need more than that. That is something that we are looking at.

Martin Horwood (Liberal Democrat, Cheltenham)

That was the precise issue that I addressed in my remarks. For instance, the directive in question does not give sufficient power to ensure that the two-way technology that we have all spoken about and which is regarded as an essential part of the specification will be included. We had consultations on the White Paper as well as pre-legislative evidence sessions before the Committee began its consideration of the Bill, so how much more consultation do we need? It is pretty clear where the consensus lies, and that we need the roll-out of smart meters to be mandated in legislation.

Malcolm Wicks (Labour, Croydon North)

It is pretty clear that the consensus is that we would all like to see the roll-out of smart meters. I hope that people will now factor into consideration the large cost, which has not—understandably—been a feature of the debate. We need to recognise that cost, as it will inevitably fall on the customer. Yes, we are looking at the legislative issues, and the results of our consultation will be published later this month. I cannot say more.

The hon. Member for St. Albans asked about display devices. We are considering the best way forward, taking into account views from the consultation and the economics involved. Obviously, it is important that we ensure that our policies on the display devices for smart meters represent a coherent package for the long term. The hon. Lady will hear about that soon.

Anne Main rose—

Malcolm Wicks (Labour, Croydon North)

She is understandably impatient. I am happy to hear from her now.

Anne Main (Conservative, St Albans)

I am delighted that I will get further information. Since the Minister mentioned cost, does he have at his fingertips a per-unit cost for an electricity display device? Perhaps I need to wait for that.

Malcolm Wicks (Labour, Croydon North)

It is possible that I will have that cost at my fingertips very soon. EDDs are important things, and someone sent me one the other day. I took it home, looked at the back of the package and put it in a cupboard. That is terribly bad, and I should not have said that. The instructions were simple but not quite simple enough. I promise to fit the thing this weekend.

Would £15 be all right?

Anne Main (Conservative, St Albans)

Each?

Malcolm Wicks (Labour, Croydon North)

That is the unit cost. The idea is that we install them ourselves, which is why I failed in my attempt to do so. For reasons of safety, I am advised that a person who does not feel confident about installation should get someone in to do it. On Report, I will bring the House up to date on my endeavours.

I turn now to new clause 21. I intend to resist it, but for a good reason. Clearly, once final decisions have been taken on implementing the roll-out of smart metering, we will need to consider the most appropriate ways to report on its progress and effect. Therefore, I do not feel that it would be appropriate to support the new clause, as it may not end up being the most relevant reporting regime for the policy on smart meters that will be brought forward in due course.

On the proposal for reporting discussions held with industry on prepayment meters, Ministers and officials regularly have meetings with companies as part of the process of policy development and delivery. As was the case with previous Administrations, it is not the Government’s practice to provide details to Parliament of all such meetings. I take the issue of prepayment meters seriously, however, as does the regulator. Ofgem is already looking at tariffs for prepayment customers and those who do not pay their bill by direct debit. It will update the findings at the forthcoming fuel poverty summit in April.

I hear very clearly the parliamentary voice on prepayment meters. The evidence base needs to be understood, as it is not as clear as some contributors suggest. I do not have the evidence at my fingertips, but I do not need it because, essentially, most prepayment customers are not fuel poor and because most of the poor—certainly the vast majority of elderly people—are not on prepayment meters. However, a rough summary of the evidence is that there is an association between being on a prepayment meter and being on a low income, so we need to be a little mindful about cost impacts on poorer but non-prepayment-meter customers.

I am mindful of that, but I hear the voice of Parliament and I share the concern that there seems to be an injustice, certainly in terms of the differential between how most of us pay for our electricity and gas and how customers on prepayment meters pay for those utilities. Some people suggest that that differential has widened, but that is something that Ofgem is looking at.

Charles Hendry (Conservative, Wealden)

When this was raised in the evidence-taking session, the Minister said:

“In particular, it is up to the companies, not the Government, to look at the problem of prepayment meters,”——[Official Report, Energy Public Bill Committee, 19 February 2008; c. 122, Q247.]

Is it still his view that it is not for the Government to address this issue?

Malcolm Wicks (Labour, Croydon North)

Clearly, the installation and administration of prepayment meters is up to the company but Parliament will have a view. Inevitably, a dialogue takes place on this, and many other matters, between the supply companies, Ofgem and the Government. I also say—and the Committee will be pleased to know that I am reaching a conclusion—that Ofgem has announced that through its recently announced probe into the market, it will look at whether the market delivers a good deal for all customers. When markets are responsible for delivering goods, it is important that we do our utmost to ensure that they operate well, not just generally, but for all their customers.

John Baron (Conservative, Billericay)

I thank the Minister for giving way, he has been very generous in allowing interventions. He appears to be turning his face against all, or most, of the new clauses, but, given that the review on smart meters is due to report at the end of the month, will he explain why he does not at least leave the option open in the Bill to come back to it? The review might conclude, without predetermining the time scale, that there is a requirement for a national roll-out of smart meters, which would require legislation.

Malcolm Wicks (Labour, Croydon North)

That is a perfectly reasonable question. All I can say is that when we publish our report later this month, the Government will consider a range of implications including whether there is a need for legislation. I had better leave the matter there.

It is worth noting that some of the information referred to in the new clause is already available. In its monitoring reports on supplies, Ofgem already publishes information about the number of gas and electricity prepayment meters in use, as well as the number installed annually. I am advised that there are approximately 3.5 million prepayment meter customers for electricity, and some 2.2 million for gas.

Paddy Tipping (Labour, Sherwood)

Before my hon. Friend sits down, can he bring the Committee up to date with his thinking on social tariffs and the nature of the discussions that he has had with energy supply companies? With regard to the voluntary approach could he explain whether companies could do more, and if they do not do more, whether a legislative or mandatory approach would be necessary?

Sir David Amess (Conservative, Southend West)

Order. I ask the Minister not to respond to that point as it goes rather wide of the discussion.

Malcolm Wicks (Labour, Croydon North)

Obviously, I was about to give a full and detailed response to the Committee, but as ever, Sir, I obey your ruling, with thanks.

Finally, the proposed new clause suggests a further requirement on the Government to report on what progress has been made to reduce carbon emissions through increased use of renewables generation and in respect of energy conservation in households. Hon. Members will know that we already have a duty to report on progress towards cutting carbon emissions as one of our four energy goals. I reiterate that we already report on energy efficiency and renewable generation and I therefore feel that the new clause would duplicate those requirements. We will continue to adhere to our existing obligations and to report on other energy-related issues to keep Parliament informed of our progress. I hope that hon. Members will not seek to press the new clause to a vote. On the essential issues we are at one about the importance of smart meters. I have talked about their benefits—although not as enthusiastically and ecstatically as the hon. Member for Northavon—and others too, have made important speeches. We need to look at the costs and the benefits. We will report on this soon and I hope, therefore, that my colleagues might consider withdrawing their amendments.

Charles Hendry (Conservative, Wealden)

I am very grateful to the Minister for the helpful responses that he has given in our discussions. Looking at the three new clauses that have been tabled in my name and that of my hon. Friend, three particular issues come through. First, on the requirement for companies to report on ETS allocations in their annual report, as the Minister said, that is an issue that time should resolve. As each round of the EU ETS becomes more rigorous, it is likely that that information will become more available. The issue of companies getting free allocations will be removed as they move towards full auctioning of certificates.

Secondly, the Minister quite rightly made the point that one does not want to impose extra burdens on business, such as the time and money to be spent on reporting requirements, if that is not absolutely necessary. We shall therefore not press that particular new clause to a vote.

Thirdly, the Minister discussed new clause 4, relating to environmental taxes. He indicated that he thought it would be difficult to identify how much money had been allocated to an individual’s bill from the different environmental charges. That was not the view of Ofgem when it gave evidence. Alistair Buchanan said:

“Some £80 of roughly £1,000 dual fuel average household bill is now a combination of ROC, which is about £10, your energy efficiency, which is about £35 to £36, and your European Union Greenhouse Gas Emission Trading Scheme (EU ETS), which is around £30.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 47, Q90.]

Ofgem seems to believe that those figures and that information are available in a straightforward way. Given the approach that it is taking on the matter, I am keen that we explore it further.

It is right that consumers should know how much of their bill is actually going on environmental and green charges, compared with the amount of fuel that they are using or standing charges. The Minister talked about the White Paper, saying that the Government want consumers to monitor and reduce energy consumption. If we want them to monitor energy consumption, surely we also want them to monitor the environmental charges that are coming through? They are charges that they are having to pay, which have been imposed in their name—rightly. We do not dispute the charges in any way, but if we want people to be informed consumers, they should have such information at their fingertips. Some elements of their bill will be going down as they use energy more efficiently, but there are other elements that will increase over time and the consumers ought to know the balance of those issues. We will, therefore, press that particular new clause to a vote when the opportunity arises.

Malcolm Wicks (Labour, Croydon North)

The burden of my argument was that to provide information in a detailed way for each consumer, given that consumers might be on different tariffs—some might be on green tariffs and they will vary from company to company—would be technically difficult, which is the advice that I have been given. However, I agreed that if we could find a way in the Bill of indicating the broad range of these charges, like the ones that the hon. Gentleman has just mentioned from Ofgem, I would be willing to look at that in relation to future billing arrangements.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for that, but will he clarify what he means? Is he suggesting that on Report or when the Bill moves to another place he would look at tabling an amendment that would require some information in the Bill regarding the environmental charges, even if that was not specific to the last pound and penny, so that there would be greater clarity on bills, or is he looking at something more vague than that? If he is prepared to come forward with a commitment that he will have an amendment of his own, it would not be worthwhile pressing the new clause to a vote.

Malcolm Wicks (Labour, Croydon North)

I cannot commit to that as I genuinely do not know whether we need a legislative cover for that, but I have said that when we report on smart meters and billing, I will see what can be done to indicate to the customer what the charges are in broad terms.

Charles Hendry (Conservative, Wealden)

The Minister is clearly trying to find some common ground and I am grateful to him for that. However, I am keen that we put down a marker that we think that this issue is important and it is my inclination that we press the new clause to a vote when the opportunity arises. We have had a good and valuable debate on smart meters, and there is no doubt that everyone in the Committee and those who are watching from outside genuinely believe that we all desire to move towards smart metering.

I am surprised by the costs that the Minister mentioned. He gave a very wide range for meters that combine electricity and gas, from around £45 to £180. However, the £20 billion upper limit that he put on the cost of a national roll-out equates to almost £1,000 per house. That appears to suggest that it could cost £800 to fit them, or that there must be other charges somewhere in the system, and that simply does not seem plausible to me. If that is the case, I might decide to resign my seat and apply for the Chiltern hundreds so that I can become a meter installer. The costs are peculiar and do not seem to stack up, so hopefully the Minister can give us more information.

A fundamental issue in that regard is that there is a widespread belief across industry and in the consumer and environmental groups that a legislative mandate will be required for that to happen. We asked all those groups whether they thought that there was a European directive that could enable that to happen, but none of them believes that that is the case. They think that there is a need for Government legislation on the matter because a number of issues need to be addressed. Who will install the meters? Will the supplier install them, in which case someone will go to Nos. 1 and 4 Acacia avenue and someone else will go to Nos. 2, 3 and 7, so that it becomes a difficult operation to manage and will not roll out in the way that people believe is necessary, or would there be a more structured approach? If the Government do not set the standards and the approach to that, it will be much more difficult for that to happen on a voluntary basis.

Equally, if the Government do not set the standards on the basic requirements of meters, as the hon. Member for Bolton, South-East said earlier, people might only be able to switch between different tariffs with their existing supplier, rather than being able to switch supplier. Also, meters might not be rolled out in a way that allows them to deal with two-way flows of power or do all of the things that we think they should be able to do, particularly the ability to deal with electricity and gas.

Hugo Swire (Conservative, East Devon)

Does my hon. Friend think that there might be something within the Government’s plans for digital switchover, which is being rolled out on a region-by-region basis, that could be emulated for switching over to smart meters?

Charles Hendry (Conservative, Wealden)

There might be, but some leadership is needed here, and I know that the Government have been thinking about that for some time. When the Energy Bill was coming along, it is a shame that the Government did not take the chance to conclude those discussions and thoughts before we got to Committee stage, because we could have moved further forward. If we want that programme to move forward and the switch to smart meters to happen, there is no doubt that there will need to be something in legislation to determine how that will happen and by what time. Therefore, when the opportunity arises, we will certainly be inclined to push new clause 1 to a vote.

New clause 1 is non-prescriptive and does not say how the switch needs to happen. It leaves that approach to the Government to decide in due course, but states that Government legislation is needed to make it happen. We are grateful for how the Minister has tried to reassure us, but I am afraid that he has not been successful on this occasion and we will need to address those issues again in further considerations of the Bill.

Steve Webb (Liberal Democrat, Northavon)

I certainly will not attempt to reprise my earlier remarks. I understand that the Minister is saying that the Government will publish their view and reflections on all those important issues in a couple of weeks, but if it turns out that legislative coverage is required, as we believe it will, how will the Government do that? Unless they do it very quickly in the Lords, we could face a good deal of delay. I have just done a quick bit of mental arithmetic, and unless I have got my zeros wrong, three months delay is a million dumb meters installed—10,000 per day, times by 90 days. We are talking about that kind of scale, which just seems crazy.

Malcolm Wicks (Labour, Croydon North)

The hon. Gentleman mentioned the complexities, but also the possibilities and challenges around that. Does he not recognise that by rushing the process, there is a danger that we could start to install the wrong technology, which would be a very heavy investment gone wrong?

Steve Webb (Liberal Democrat, Northavon)

That is interesting language. I do not think that anyone could accuse the Government of being in a rush with their energy policy. At any point in time, there is always a chance that better technology is just around the corner, or that we could come up with a better alternative if we thought about it a bit longer. I hesitate to say it, but government is about making decisions. On balance, I think that the Committee’s view is that it is time to make a decision on the matter.

Malcolm Wicks (Labour, Croydon North)

Given the great passion with which the hon. Gentleman spoke about the possibility that people could switch suppliers almost on a daily basis, has he been able to ask during his breakfasts with the industry whether the current technology would enable that to happen? That is a genuine question. I do not know the answer.

Steve Webb (Liberal Democrat, Northavon)

Yes, I have. It seems to me that, once we have the concept of the smart meter, which is available around the world and is already happening, the idea of a set of data being sent to a database and an answer being sent back borders on the trivial. We are not talking about carbon capture and storage, we are talking only about sending some data off to a website and receiving an answer. It does not seem that great.

John Baron (Conservative, Billericay)

Is there not a danger with the Government’s argument that, if they keep waiting for the latest development in technology before making a decision—given that technology is ever evolving—they will never actually make a decision?

Steve Webb (Liberal Democrat, Northavon)

I absolutely agree with that point. It is very much the content of my argument.

As to which of the amendments best deliver the goals, obviously I think that our amendment is better, but I will not be partisan about it. If we have the opportunity to divide on the Conservative new clause on smart meters, we will be happy to support it. On that basis, and assuming that we will have that opportunity, I will not seek to pursue new clause 20.

I am pleased to see that the Minister’s review considers switching between suppliers, which has to be a good thing. I will just sow a final seed with him on the potential for value added in this roll-out. If officials are to be authorised to go into the home of every person in the country to sort out their electricity meters, please can we consider whether that procedure can be used to piggyback fuel efficiency measures, such as loft insulation.

The Minister may want to roll his eyes and say that that will make the process more complicated, but there is a huge opportunity there. People will be considering their electricity supplies and their power consumption. Sending officials out to every household in the land, presents perhaps a once-in-a-lifetime opportunity to tackle some of those valuable considerations, and I hope that we will piggyback some of them on top.

Malcolm Wicks (Labour, Croydon North)

I was listening intently to the hon. Gentleman, but I was not rolling my eyes, or only over whether I need to move the next clause formally. I was thinking ahead and that was why I was rolling my eyes.

Steve Webb (Liberal Democrat, Northavon)

Sorry, I mistook multi-tasking for the rolling of eyes.

I think that the Committee’s view is that it is time for decisions to be made. We want to give the Minister powers, and he seems to be fighting us off. We trust him, we want him to have the powers, and I hope that he will not resist us.

Malcolm Wicks (Labour, Croydon North)

On a point of order, Mr. Amess—can I speak to the clause?

Sir David Amess (Conservative, Southend West)

We have disposed of the clause.

Clause 81

Malcolm Wicks (Labour, Croydon North)

I thought that we were still into smart meters and I was awaiting the excitement of the vote, but that comes later, does it not? That is what threw me.

Clause 81 needs to be regarded partly in the context of the group of clauses. We have just voted on clause 80 so unanimously because we know that it makes a number of minor and consequential amendments to the Gas Act 1986, to supplement the substantive transfer of functions in relation to gas meters made by clause 79.

Before the transfer, functions under section 17 of the Act and related regulations are the responsibility of Ofgem. Where the legislation mentions those Ofgem employees who carry out such functions, it refers to them as members of the director’s staff. To reflect the transfer of responsibilities and to future-proof the provisions against possible machinery of government changes, it is proposed to replace the references to members of the director’s—Ofgem’s—staff with more general references to persons employed in the civil service of the state.

Most of the functions covered in the transfer are carried out by appointed meter examiners, but not all meter examiners are civil servants, and they still need to be paid. Clause 80(4) therefore makes provision to allow payment of those examiners who are not employed in the civil service of the state, including in respect of any pensions payable. I am therefore grateful that colleagues supported that clause.

Clause 81 is necessary to ensure that the National Weights and Measures Laboratory can recover the costs associated with functions relating to the standards and accuracy of meters under section 17 of the Gas Act 1986. Responsibility for those functions currently rests with Ofgem, which is funded for that purpose by a licence fee paid by pipes and wires companies. Those are the companies that transfer gas and electricity through the networks—the gas transporters and the electricity transmission and distribution operators.

The cost of such fees is then passed on to other groups operating in the competitive gas market, such as the suppliers themselves, as part of the normal charging arrangements for use of network services. Given that the licence fee is currently collected by Ofgem, however, we need to find a way of ensuring that the laboratory, which is concerned with metrology, can recover any costs associated with its new responsibilities under section 17 of the Act.

The solution proposed in the clause reflects the model already used for energywatch. Put simply, Ofgem will continue to collect the money attributable to such functions from the pipes and wires companies through the licence fee. However, the money will pass directly into the consolidated fund, from which the laboratory can then recover it. That is the least burdensome approach, because licensees are not required to change arrangements for the payment of fees, and the laboratory does not need to set up any new complex financial system.

A requirement for the Secretary of State to consult on and publish any modifications provides protection for licence payers. The power itself is available only for a period of six months following commencement because it is envisaged that only one licence modification will be required.

As I have explained, this important clause represents no additional burden to the pipes and wires companies that receive and pay for the service, but it ensures that the National Weights and Measures Laboratory can recover its costs for the transferred work that it will undertake.

Clause 82

Malcolm Wicks (Labour, Croydon North)

I can move the clause very briefly because it transfers existing statutory responsibility for the technical aspects of electricity meters from the Gas and Electricity Markets Authority to the Secretary of State. It follows the same form as the transfer of functions in relation to gas meters in clause 79.

Clause 83

Malcolm Wicks (Labour, Croydon North)

Clause 80 made several minor and consequential amendments to the Gas Act 1986 with regard to the transfer of functions in relation to gas meters, which was set out in clause 79. Similarly, clause 83 makes several minor and consequential amendments to the Electricity Act 1989 in relation to electricity meters, following the transfer of functions set out in clause 82.

Clause 84

Malcolm Wicks (Labour, Croydon North)

The clause sets out provisions on cost recovery for functions in relation to electricity meters in the same way as clause 81 did for functions in relation to gas meters. That is necessary to ensure that the National Weights and Measures Laboratory can recover the costs associated with functions relating to the standards and accuracy of meters under schedule 7 of the Electricity Act 1989.

Clause 85

Charles Hendry (Conservative, Wealden)

I beg to move amendment No. 47, in clause 85, page 75, line 8, at end add—

‘(3) This section does not apply to electricity display devices.

(4) In this section, “electricity display device” means a device that can be attached to a meter board in order to provide information on the amount of electricity being used.’.

The clause relates to electricity safety standards. Essentially, it will transfer inspection and enforcement issues relating to those standards from the Secretary of State to the Health and Safety Executive and give the HSE the power to amend the standards as it sees fit. In particular, it deals with the issue of electricity display devices, which the Minister mentioned earlier. I predicted on Thursday that they would be popped into a cupboard:

“They will put them away in a cupboard and never use them again”.——[Official Report, Energy Public Bill Committee, 6 March 2008; c. 539.]

It is only because I shamed the Minister into taking his out of the cupboard that it might be fitted, but I suspect that if he looks at it, he will see writing on it saying, “This should only be attached to a meter by somebody who understands what they are doing.” He knows an awful lot about an awful lot of things, but whether he knows how to attach things to his meter remains to be seen. If he is not back here on Monday, we will understand that he did not, but I shall not go there.

The issue with EDDs, although I do not want to start a protracted debate about them, is that the Government appear to be advocating not smart metering but giving consumers more information, which has a danger. I should like to know how that relates to the clause in terms of safety measures and how they will be monitored. We will be expecting consumers who do not know much about the issues to attach EDDs to their own meters. That could be dangerous; they could get shocks, or worse. How will that be dealt with? Will the companies providing the devices have an obligation to be responsible somehow for their safety? What will happen in those circumstances? It is a probing amendment to see how the Minister plans to take forward the measures.

EDDs are not a satisfactory replacement for smart meters, although I am sure that you do not wish us to get into a debate on that, Mr. Amess. They are not as safe as they might be, and people might be tempted to install them themselves. Who will have legal liability if something goes wrong? The amendment would ensure that the companies would be exempted from any responsibility if someone fits an EDD incorrectly.

Brian Iddon (Labour, Bolton South East)

The Department of Health funded the Draper report, published in 2005, which found that children living from birth within 200 m of high-voltage power lines had a 70 per cent. higher chance of developing leukaemia in childhood. It was the largest ever study of childhood cancers and power lines, involving every childhood cancer case in the UK during a 30-year period. The causes of childhood leukaemia are not well understood, but there is increasing evidence that environmental factors play a part. Ionising radiation is the only established cause of the disease. In 2004, the Health Protection Agency recommended that the Government

“consider the need for further precautionary measures”

to reduce public exposure to electromagnetic fields.

Sir David Amess (Conservative, Southend West)

Order. The hon. Gentleman is being ingenious, but I have been listening carefully, and I cannot see the relevance to the amendment. It seems to me that he is speaking about new clause 26. Could he make his remarks entirely relevant to amendment No. 47?

Brian Iddon (Labour, Bolton South East)

I seek your guidance, Mr. Amess. I am trying to discuss electrical safety with respect to health. Is that not in order under the clause?

Sir David Amess (Conservative, Southend West)

The amendment refers specifically to electricity display devices. If the hon. Gentleman can make his remarks relevant to that, I am happy to hear him.

Brian Iddon (Labour, Bolton South East)

My ingenuity does not stretch that far.

Charles Hendry (Conservative, Wealden)

On a point of order, Mr. Amess. Could you clarify whether this important and interesting issue might be relevant to the clause stand part debate on clause 85, which relates to electricity safety?

Sir David Amess (Conservative, Southend West)

The hon. Gentleman makes a very good point. It would be entirely relevant to a clause stand part debate.

Malcolm Wicks (Labour, Croydon North)

I should clarify for the record that my display device is in a cupboard because I was so busy drafting a response to the hon. Member for Wealden that I did not look at the instructions closely enough.

We will discuss the big issues about display under our proposals on smart meters. Display devices may not be as smart as smart meters, but they should not be ashamed. They should be proud and come out of the closet. That will include my own closet at the weekend. I will my report progress to the hon. Gentleman, albeit privately.

The amendment applies to display devices and looks at the health issues. The safety of electricity display devices is completely separate from the safety of electricity distribution equipment, which is the subject of the clause. My understanding is that display devices can be attached to a meter board to provide information on the amount of electricity being used. The objective of such devices is to raise awareness of energy consumption and thereby promote energy efficiency. Such battery operated devices are readily available at appropriate retail outlets. One energy supplier currently provides them free to customers who sign up to a particular tariff. As I mentioned in a previous debate, the Government will publish their policy on such devices later this month as part of the response on metering and billing.

The clause deals exclusively with section 29 of the Electricity Act 1989 and regulations made under it. Those regulations relate to the safety of electrical equipment operated by generators, electricity transmission and distribution companies, and meter operators. They might apply to overhead power lines, buried cables and meters, but not to devices installed by the consumer such as electricity display devices. The amendment would therefore not have its intended impact and is unnecessary. I believe that it is a probing amendment.

In his discussion last Thursday, the hon. Member for Wealden raised concerns about the installation of electricity display devices. Perfectly properly, he has returned to that theme today. He might find it helpful to know that my officials have been in discussion with the Health and Safety Executive about the safety risks associated with such devices and their installation. Neither my Department, nor the HSE consider there to be any notable safety issues.

The instructions on how to install electricity display devices that are currently on the market are clear. They provide step-by-step instructions on how to attach the device to the meter board. I look forward to reading them again. Consumers are advised to contact qualified electrical installers if they are unsure about how to install the devices. Any fault with a device would be a consumer product reliability issue, as with any other electrical device or appliance. As the clause does not apply to such devices, the amendment is unnecessary. I request that the hon. Gentleman considers withdrawing it.

Charles Hendry (Conservative, Wealden)

I am happy to withdraw the amendment. As I made clear, it was a probing amendment. I thank the Minister and his officials for the work that they have done with the HSE to clarify the situation. He has provided the clarity that we were seeking. However, we will return to these issues under the wider debate on smart metering. I beg to ask leave to withdraw the amendment.

Sir David Amess (Conservative, Southend West)

Before we come to the clause stand part debate, I remind the Committee that anyone wishing to participate must make their remarks relevant to the clause, which is entirely about electricity safety. The debate must not be drawn towards any new clauses that hon. Members have tabled.

Brian Iddon (Labour, Bolton South East)

I appreciate your patience and I will endeavour to follow your ruling, Mr. Amess.

I have already referred to the fairly hefty Draper report. In 2004 the Health Protection Agency recommended that the Government

“consider the need for further precautionary measures”

to reduce public exposure to electromagnetic frequencies. In response, the Government set up a stakeholder group called SAGE—the Stakeholder Advisory Group on ELF EMFs—which has been examining electromagnetic frequency issues since 2004. It published its first report last year, proposing a moratorium on the building of new homes and schools in proximity to high-voltage power lines and vice versa. SAGE was unable to recommend that option explicitly because substantial costs to the energy industry were involved. A cross-party inquiry into childhood leukaemia was set up in 2006, and it reported in 2007. Its main recommendation was to introduce a moratorium on building new homes or schools within at least 60 metres of existing high-voltage overhead transmission lines carrying a 275 kV or a 400 kV load to protect children from an increased risk of leukaemia. The Government referred the 2007 SAGE report to the Health Protection Agency last year for advice. The HPA issued guidance on the report and also took into consideration the 2007 report published by the cross-party group of MPs. It recommended that

“the attention of local authority planning departments and electricity companies be drawn to the evidence of a possible increase in childhood leukaemia, which may result from siting new buildings very close to power lines.”

Last month, the Minister of State, Department of Health, my right hon. Friend the Member for Bristol, South (Dawn Primarolo) updated the House by reporting that discussions were under way with agencies, the industry and trade associations to seek initial views on the practicalities of implementing those recommendations. The matter was discussed during the passage of the Planning Bill and the Housing and Regeneration Bill. As a result, the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Hartlepool (Mr. Wright) asked his officials to draft proposals by Easter. I felt that that matter should be raised during the passage of this Bill.

The World Health Organisation also acknowledges the association—I cannot put it more strongly than that—between a child living in proximity to high-voltage power lines and childhood leukaemia. In its latest report, the WHO states that

“low cost precautionary measures are warranted.”

The Bill will result in an expansion of the grid to accommodate greater generating capacity especially from renewable sources of energy. In my view, it is important that the views of such organisations are taken into account by the Minister when that extended grid is established. I look forward to any comments that my hon. Friend the Minister can make at this stage on this matter.

Malcolm Wicks (Labour, Croydon North)

Let me just introduce the clause and then I will comment on the concerns of my hon. Friend the Member for Bolton, South-East. The clause concerns a transfer of responsibility for electricity safety from the Secretary of State for Business, Enterprise and Regulatory Reform to the HSE. The engineering inspectorate of the then Department of Trade and Industry was identified as carrying out functions in the area of electricity safety in a 2005 report about reducing administrative burdens by Philip Hampton. It highlighted that those functions were important for protecting the public. The Committee will be aware of the potential for serious personal injury and even fatality as a result of non-compliance with standards for electrical safety. It is important, for example, to ensure that electricity infrastructure complies with the required clear signage to protect against persons coming into contact with high-voltage installations.

The HSE’s remit extends to the safety of workers and the public in workplaces. The Hampton report noted that there was a link between that and the enforcement of electricity safety regulation. As such, we considered it to be appropriate to move those functions relating to safety of persons under the umbrella of one single safety regulator. That transfer ensures that health and safety inspectors, who have day-to-day experience of dealing with matters of safety, will now inspect and enforce issues relating to electricity safety standards. The transfer means that those inspectors will also be able to use their own governing legislation, the Health and Safety at Work etc. Act 1974 in cases in which there has been a breach of electricity safety standards. That allows for the use of criminal sanctions and even a maximum two-year imprisonment for breach of an enforcement notice. That means that sanctions available in cases in which there has been a breach of electricity safety standards mirror those available for a breach of all other safety standards, which are governed by the 1974 Act. I am sure that the Committee will agree that this is a proportionate measure since the most serious breaches of electricity safety standards could result in death.

In response to the question from the hon. Member for Bolton, South-East, the Government take their advice from the Health Protection Agency on limiting exposure to extremely low frequency electromagnetic fields, which I will refer to as ELF EMF for brevity.

In 2004, following a comprehensive review of scientific evidence, the then National Radiological Protection Board, which is now part of the Health Protection Agency, recommended the adoption of guidelines set by the International Commission on Non-Ionizing Radiation Protection. Those guidelines—known as ICNIRP guidelines—are based on the established health effects of exposure to ELF EMF. They set values for workers, building in a significant level of protection. The guidelines for public exposure to power frequency magnetic fields incorporate a further fivefold safety margin, in recognition of the fact that the general population includes individuals who may be more sensitive to adverse effects than the working population.

In addition to the established health effects of exposure, there is some scientific evidence to suggest a link between childhood leukaemia and EMF exposure below the guideline levels, although there is no consensus on a plausible biological mechanism to explain the association. However, in view of the uncertainties associated with the health effects of exposure below the guidelines, the Health Protection Agency also recommended that the Government consider the need for further precautionary measures in respect of exposure of people to ELF EMF.

In response to that recommendation, a stakeholder advisory group on such exposure was established, which brought together a range of stakeholders, including academics, electricity industry representatives and pressure groups, with a remit to identify and explore the implications for a precautionary approach, and make practical recommendations for precautionary measures.

That stakeholder advisory group, SAGE, reported in April 2007 and made recommendations in relation to power lines, property, wiring in homes and electrical equipment in homes. On receipt of the report, the Government sought the advice of the Health Protection Agency on the recommendations it contained. In November 2007, the Health Protection Agency responded to the SAGE report.

We are currently considering the Health Protection Agency report, and I expect to receive advice from officials on that issue in the near future. We expect to respond to the SAGE report, including setting out any practical precautionary measures that we think are justified, later in the year.

None

Malcolm Wicks (Labour, Croydon North)

This important clause provides for more appropriate penalties where an individual steals, or attempts to steal, sensitive nuclear information from sites holding uranium enrichment information, but which are not licensed nuclear sites.

The Nuclear Installations Act 1965 allows for sites where the reprocessing or enrichment of uranium takes place to be designated as prohibited places, for the purposes of the Official Secrets Act 1911. Two sites were previously designated prohibited places, and remain so. They are the Sellafield and Urenco Capenhurst sites. The Energy Act 2004 resulted in a major restructuring of the nuclear industry. It meant that sensitive nuclear information pertaining to uranium enrichment could be taken and stored away from the two sites designated prohibited places under the Nuclear Installations Act. There are already clear requirements for holders of sensitive nuclear information, in terms of what they must do to protect it. The Committee will want to be assured that the security regulator, the Office for Civil Nuclear Security, is content that those requirements are both sufficient and up to date. As such, the Bill proposes no changes to those requirements.

Steve Webb rose—

Clause 86

Joan Humble (Labour, Blackpool North and Fleetwood)

Order. I understand that the Minister was considering giving way to the hon. Gentleman.

Steve Webb (Liberal Democrat, Northavon)

I have kept the Minister on tenterhooks for this killer intervention, and I hope not to disappoint him. Clause 86 on which he was just about to conclude his remarks earlier contains the two words “nuclear” and “secrets” and that always worries Liberal Democrats a little. Given the track record of the nuclear industry for secrecy and lack of disclosure, can he assure us that the scope of the clause literally covers national security and so on and that it will in no way give greater secrecy to commercial and other matters that enable us to scrutinise either the companies or the Government’s nuclear policy?

Malcolm Wicks rose—

Brian Binley (Conservative, Northampton South)

Will the Minister give way? Will he allow me to add to that?

Joan Humble (Labour, Blackpool North and Fleetwood)

Order. The Minister should respond to the hon. Member for Northavon before moving on.

Malcolm Wicks (Labour, Croydon North)

I can give the hon. Member for Northavon the assurance that he seeks. He said that I was about to conclude my remarks. He was being a little optimistic, so it might help if I make progress. Would it be of assistance to the hon. Member for Northampton, South if I said more about the clause before he made his intervention?

Brian Binley (Conservative, Northampton South)

If the Minister thinks that it would, I should be delighted to wait.

Malcolm Wicks (Labour, Croydon North)

Before lunch, I was making the important point that the Energy Act 2004 resulted in a major restructuring of the nuclear industry, whereby sensitive nuclear information pertaining to uranium enrichment could be taken and stored away from the two sites designated as prohibited places under the Nuclear Installations Act 1965. It would help the Committee if I emphasised the word “information”. We are talking about information, not materials. Materials must be kept on a licensed site. There are clear requirements for the holders of sensitive nuclear information and what they must do to protect it.

The Committee can be reassured that the security regulator—the Office for Civil Nuclear Security—is content that the requirements are both sufficient and up to date. The Bill proposes no change to the requirements. However, the Office for Civil Nuclear Security is concerned that, should an individual steal, or attempt to steal, sensitive nuclear information from premises that are not currently designated a prohibited place, the only sanctions available are prosecution for burglary or theft. I recognise that appropriate penalties are available for the usual offences of theft or burglary. However, I hope that the Committee will agree that theft and the potential onward dissemination of information that relates to uranium enrichment represents a risk to our nation’s security, so such matters warrant different treatment.

The regulator has therefore requested that the theft of sensitive nuclear information be punishable by stronger penalties. My view and that of the regulator is that the Official Secrets Act 1911 provides appropriate protection in such matters of national security. An offence under the Official Secrets Act carries a maximum prison term of 14 years, but the provisions also remove the requirement on the state to prove that the person broke into that prohibited place for a purpose that would compromise the security interests of the state.

To designate specific premises as prohibited places, they must either be owned or occupied by the Crown or deemed as belonging to, or used for the purposes of, the Crown. Clause 86 will therefore insert proposed new section 80A into the Anti-terrorism, Crime and Security Act 2001, which governs issues relating to the security of uranium enrichment information and technology. The proposed new section will allow for premises holding equipment, software or information that relates to uranium enrichment to be deemed as belonging to the Crown for the purposes of the Official Secrets Act. As a result, the Secretary of State may designate premises holding information that relates to uranium enrichment as prohibited places under that Act. That will provide more appropriate sanctions for theft or attempted theft of that information. The clause represents an important part of protecting our national security.

In answer to the hon. Member for Northavon, let me say that sensitive nuclear information that relates to uranium enrichment that is held on licensed civil nuclear sites is already covered by the Official Secrets Act. It is only right that we ensure that consistent sanctions are available for sensitive nuclear information that is stored or used off licensed civil nuclear sites—for example, at research facilities. The Official Secrets Act is the only appropriate legislation for issues of national security. Given the implications for national security, the sanctions under the Act are the most appropriate; they are a minimum of three and a maximum of 14 years in prison.

Given the scope of the clause that I have outlined, I hope that I have put at rest the fears of the hon. Member for Northavon. To answer his question in a little more detail, I suppose that he is really asking whether the clause applies only to national security issues. The answer is yes. The clause will apply only to persons who steal sensitive nuclear information, where the sanctions are those under the Official Secrets Act.

Charles Hendry (Conservative, Wealden)

This is clearly an important clause that deals with serious issues. Normally, we would have let this sort of thing go through without further discussion or debate. At the heart of the clause seems to be the rather quaint notion that Government secrets are kept in the places where they are supposed to be and are not sent to the United States, lost in the post or dropped on roundabouts somewhere in the west country. We must consider at exactly which places are covered by such establishments. Clearly, there is an issue when material is in transit. If material is being moved from one of the establishments that the Minister mentioned to research laboratories elsewhere, is it protected while in transit? What happens if some of that material goes astray?

Malcolm Wicks (Labour, Croydon North)

I am sorry to intervene so soon, but I hope that the hon. Gentleman has taken on board the fact that the clause deals with information, not nuclear materials.

Charles Hendry (Conservative, Wealden)

I totally understand that. The Government have not so far managed to lose nuclear materials, but they have lost an awful lot of information in various places. If the information is held on a computer disc or a laptop, what happens if it goes astray once it is in transit or someone gains access to it who should not have access to it? What happens in relation to international establishments? The companies that are likely to build the new nuclear power plants are either Arriva, which is French, or Westinghouse, which is American. There are a couple of alternatives, but those are the likely ones. If an issue required close investigation, it is quite possible that that would involve sending the information to an overseas base to be analysed and investigated further. What protection do the Government have for the security of information in those circumstances? Does the clause cover material that is held in different countries?

Brian Binley (Conservative, Northampton South)

I wish to carry my hon. Friend’s argument just a little further. I agree with the Minister that this is a very important clause. I recognise that what we are really doing is carrying on from the restructuring of the Energy Act 2004, but other factors have come to light since the creation of that Act with regard to the safe handling of information. I do not wish to bring up the incidents that have been a great cause of concern to the Government, but we are talking about stronger sanctions for theft and attempted theft under the clause. However, nothing is said about people who lose information, do not follow protocols and are incompetent, negligent or whatever, thereby allowing information to go astray or to fall into undesirable hands.

I do not suggest that we have penal sanctions for those offences—I see them as offences—but there ought to be some consideration of the matter and some tightening up of protocols and of how we keep information safely, especially in this important area. Would the Minister consider that viewpoint, too? It is not covered in the clause.

Malcolm Wicks (Labour, Croydon North)

Our purpose is to make sure of the most stringent controls on the holders of information, to ensure that sensitive nuclear information is safeguarded. That is the purpose of the clause. It relates to information, not materials, that could be held in different kinds of establishments, including research establishments. We have to make sure that we have a regime in place. I have emphasised the importance of the Official Secrets Act and the appropriate terms of imprisonment. Also, the Office for Civil Nuclear Security, which is the security regulator, is satisfied with the requirements that we are putting in place.

I might need to correspond with the hon. Members for Wealden and for Northampton, South about issues such as whether the information might go to companies registered abroad. I will have to write to them. The issue raised by the hon. Member for Northampton, South is obviously vital, in that everyone in the workplace—everyone involved—should be absolutely vigilant and follow proper procedures. I am sure that that happens and that we have a rigorous regime in place. At the next opportunity, when I talk to the Office for Civil Nuclear Security, I will take to it the Committee’s concerns.

Stephen Ladyman (Labour, South Thanet)

My reading of the clause suggests that it pertains to inserting into a clause of a terrorism Act something that relates only to the enrichment of uranium. The clause is narrowly restricted to secrets and information about the enrichment of uranium. It goes no wider than that. Concerns by the Liberal Democrats that other information might be hidden are certainly outside the scope of the clause; likewise, the exchange of information about the construction of commercial reactors.

Malcolm Wicks (Labour, Croydon North)

That is helpful. I will return to some of the issues about sanctions. I have given a broad answer. I am advised that existing regulations—the Uranium Enrichment Technology (Prohibition on Disclosure) Regulations 2004 and the Nuclear Industries Security Regulations 2003—already cover the duties and responsibilities of those who hold such information and deal with sanctions. I am advised that, if information were to get lost in transit, sufficient protections are available on the holders of information on site, off site or in transit. However, I take the point about human error. Everyone needs to be absolutely vigilant.

The places covered are those where research into uranium enrichment technology is undertaken. The technology represents a proliferation risk and needs to be appropriately protected, in line with our international obligations and our national security. Supply chain companies that manufacture parts for uranium enrichment technology are also covered.

Returning to the question of whether such information could be transferred overseas and how it would then be protected, I am advised that that could be done only with agreement on how it would be protected by the receiving authority. Our duty would be to be satisfied with that protection. I hope that I have satisfied the Committee.

Clause 87

Malcolm Wicks (Labour, Croydon North)

This clause will ensure that where offences as set out in the Bill are committed liability can be attributed, and proceedings brought against, the person responsible for the offence, as well as against the corporate body that they work for. Liability can be attributed to, for example, an officer, manager or employee, providing that it is proven that the offence was committed with their consent, connivance, or is attributable to their neglect.

Clause 97

Malcolm Wicks (Labour, Croydon North)

This is my favourite clause and I must address it at some length. It states that the short title for the Act will be the Energy Act 2008.

New Clause 1

New Clause 4

New Clause 5

New Clause 6

New Clause 10

Charles Hendry (Conservative, Wealden)

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

We have had an exciting few moments—democracy in action. We now understand why we are trying to teach countries around the world that they should move towards democracy; it is so that they can go through that rather special moment where people who have spent years arguing for things then turn around and vote against them when they are given the opportunity to do so.

The issue of a renewable heat obligation was raised by many colleagues on Second Reading and by a number of people who have made representations to us about the fact that heat should be included in the Bill. A renewable heat obligation would require energy suppliers to source a percentage of heating fuel from a range of renewable sources, which could include solid, liquid or gaseous fuels produced from biomass, passive solar heating systems and geothermal systems.

About 50 per cent. of the UK’s final energy demand is in space, water and process heating. Around 1 per cent. of heat is currently generated from renewables. That has declined in recent years, both as a proportion of the whole and in absolute terms, as some industrial wood-fired systems have been decommissioned because of tightened emission regulations. Around 85 per cent. of domestic heat, 50 per cent. of industrial heat and 77 per cent. of commercial heat is provided by gas, with the remainder coming from coal and oil.

Heat is responsible for 47 per cent. of the UK’s CO2 emissions and, broken down by sector, roughly 42 per cent. of those emissions come from the residential sector, 43 per cent. from industry and 15 per cent. from commerce. By providing more heat from renewable heat technologies, we could deliver carbon savings of 7.3 million tonnes of CO2 by 2020. The biomass taskforce estimated that 7 per cent. of the UK’s heat energy could be provided from biomass alone. A successful example of a community heating scheme is in Tower Hamlets, which uses a gas-fired combined heat and power plant to provide heat and electricity at 20 per cent. below the cheapest supplier, saving 2,500 tonnes of CO2 a year.

More than two thirds of the energy output to power stations is lost as waste heat. That waste costs the UK economy more than £5 billion a year. It is clear that if our EU targets are to be met, a dedicated support mechanism for renewable heat will be needed. The introduction of an obligation on upstream suppliers of fossil fuels into the transport market creates a precedent for the same sort of mechanism to be applied in the fossil fuel heat market. That could give a steadily increasing incentive to generate cost-efficient renewable heat with a buy-out and recycle mechanism to address the potential for price spikes and provide a means for addressing any under-supply issues. Linking all three markets would enable renewables targets to be met with maximum economic efficiency.

Stephen Ladyman (Labour, South Thanet)

As the person who in a previous life introduced renewable transport fuel obligations, I point out to the hon. Gentleman that many non-governmental organisations and environmental activists have now decided that they oppose that introduction because one cannot guarantee that the biomass will be produced sustainably. The Government have taken the sensible decision that 5 per cent. can produced sustainably, but they will not go beyond that until we can prove that it can be produced sustainably. If we were to pass the new clause, it would require the Government to do something that they cannot guarantee to do sustainably, and would therefore be far from a green solution to our problems.

Charles Hendry (Conservative, Wealden)

The hon. Gentleman raises a valid point. Indeed, my colleagues voted against the RTFO on the grounds that one was not sure about the sustainability of the sources from which it was coming. I wanted to stimulate a debate about heat and about the whole of issue of energy, which has been missing from the debate so far and is missing from the Bill. Looking at it in this way provides the opportunity to address how we will do more to get heat from renewable sources. There are issues, such as the one that he has raised, which provide a challenge to going forward in this way, but that does not negate the importance of trying to do more to get more of our heat from renewable sources than we do at the moment.

Some observers say that, to encourage the development of low-carbon heating, local authorities should be mandated to develop a local energy strategy for heating. In areas with sufficient heat density that would be district heating, which would use the heat demand in public sector buildings to underpin its development. Under such a scheme, planners will be given the power to insist upon district heating, local CHP and other forms of decentralised energy, including microgeneration, in granting permission for developments. A study by the Energy Saving Trust found that in 2000, 83 per cent. of energy usage in the home was for space and water heating. That excludes electric water heating and still represents about 24 per cent. of total UK energy consumption.

Unlike mainland Europe, the UK market for low-carbon and renewable heating remains underdeveloped due to the lack of a coherent strategy. For example, there is no policy to promote the use of renewable heat. The Government have set a target that all new homes should be zero carbon by 2016. The 83 per cent. of energy that a typical home consumes to provide space and water heating breaks down into 59 per cent. for heating and 24 per cent. for hot water. A newly built house with good standards of insulation can reduce heating requirements by about 75 per cent.

The new clause offers one way forward to encourage the generation of more heat from renewable sources. It has significant backing in industry, but I recognise that there are concerns. Essentially, it is a probing new clause to stimulate further clarification from the Minister of what he thinks could be done on this issue. For example, the question of the interaction with the renewable obligation has not yet been addressed properly. Effectively setting two administered prices for biomass under the renewable obligation and the renewable heat obligation will have a potentially disruptive effect on the outlook for investment in biomass power and combined heat and power. Some say that that is also highly unlikely to deliver investment in the heat network infrastructure. Only investment in the boiler or other heating plant would occur as a result of that obligation.

The critical factor in establishing a competitive alternative to gas in the heating market is this infrastructure. I realise that there are problems with this way forward, but I hope that it will give the Minister and other hon. Members the opportunity to talk about what more we can do to address heat within the framework of the Bill.

Martin Horwood (Liberal Democrat, Cheltenham)

It is a pleasure to be serving under your stewardship again, Mrs. Humble.

The new clause is a very welcome probing clause. There are some difficulties with it and the hon. Member for Wealden has been generous enough to point some of those out. However, it certainly deals with an issue that needs to be addressed.

I am not sure how many members of the Committee have installed renewable heat. I have, but it was a bit of a nightmare process. I have solar thermal panels fitted to my house. I looked to the predecessor of the low-carbon buildings programme and discovered that grants were in rather short supply. I realised very early on that it would be virtually impossible to be one of the few lucky runners who manage to secure a grant each month. I discovered that there was a rather bureaucratic process for the approval of various heating systems and supplies. The kind of heating system that I wanted, which included under-floor heating as well as heated water, did not at that time qualify for the Government scheme. In practice, I therefore had to take the risk of going with a somewhat untested supplier. It was quite an expensive process. It was one that I was willing to invest in, but for many members of the population, it would have been pretty unaffordable.

A real push is needed to shake down the market and establish leading household names as popular suppliers of renewable heat technologies of various kinds at the micro, household level. Costs must also be brought down to make it a more affordable technology. We need to tackle those issues.

As the hon. Member for Wealden said, 47 per cent. of our carbon emissions derive in one way or another from heating. Of that, 12 per cent. is from heat generated by electricity so there is a direct link back to electricity generation. Of the remaining 35 per cent. of direct heating, a very high proportion comes from gas and fossil fuels. We definitely need a long-term framework of financial incentives to incentivise not just individuals at household level and energy suppliers, but communities, social enterprises and others to take advantage of technologies such as combined heat and power. The low-carbon buildings programme is effectively a broken reed and a dead duck, and nothing from the Government has yet supplied it. I am tempted to use another horse racing analogy and say that it has fallen at an early fence. We certainly need some kind of incentive scheme to promote renewable heat at community level, where it is most effective.

I support the new clause, but there are some aspects that I would like to challenge. First, subsection (2) states that the provision would only require

“suppliers of fossil fuels for the purposes of heating, to replace, over a specified period, a rising proportion of their supply with metered units of renewable heat energy.”

Of course, if one looks at the large proportion of heat that is supplied by the generation of electricity, one will see that there are electricity suppliers, such as my own, Ecotricity, that do not have any fossil fuel supply. It is an entirely renewable supplier, so it would not benefit from any incentive under that phraseology because it is not a fossil fuel supplier, even though it is not a supplier of renewable heat as such. To shift and incentivise the market towards renewable heat, we need something a little more inclusive.

There is also the problem of the interplay between the renewable heat obligation and the renewables obligation. That needs to be worked out, as it is not clear how that would work with regard to the energy suppliers. As the hon. Member for Wealden mentioned, the Combined Heat and Power Association argues that one of the most critical elements in getting combined heat and power off the ground at community level is the need to build local infrastructure. That is what makes the critical difference in establishing it as an alternative to gas. I am not clear how the new clause would take us forward on that, so perhaps he will address that point in his closing remarks.

Finally, there is the issue of sustainability, which was raised by the hon. Member for South Thanet. I do not think that that is as much of a problem as there would be with liquid transport biofuels, where there is clearly a big concern about sustainability. I think that a great deal of local heat technology and the use of local biomass from waste products is probably very sustainable, but he is right to say that we need to be sure that certification and the methodologies are in place. I support the new clause and think that it is a welcome probing clause. It asks the most important question: if it is not exactly the right formula, what is and what will the Government do?

I hope that the Minister, on this one occasion, will not promise us yet more consultation exercises, because we have been discussing renewable energy and heat of various kinds in this country for decades and have had endless consultations. He should aim—I shall venture to suggest another horse racing analogy—to be the Kauto Star of British Politics in that area at least and forge ahead in a really proactive way, rather than just resting on his laurels having won one Gold cup and indulging in yet more consultation. It is clear that we need a long-term financial framework, and if not this one, then what?

Alan Whitehead (Labour, Southampton, Test)

I strongly support some form of heat obligation or similar, because it is important that we take account of that large area of UK energy, particularly in the context of the 2020 targets that have now been agreed for renewable energy. I support the idea in principle, but the new clause, as has been pointed out, seems to confuse itself substantially with the existing renewables obligation, particularly in its later provisions, and that would need to be fundamentally disentangled.

We should consider further the idea, which was raised in the Committee earlier, of pursuing some form of renewable gas obligation as a substantial proxy for elements of renewable heat obligation because of the substantial part of our heat requirements that is fuelled by gas. I also ought to report to the Committee the sad news that I already have renewable heat on my roof, and nothing whatsoever went wrong with the installation, the application for a grant to assist in the installation or its working. I know that that is a surprise to the Committee.

Stephen Ladyman (Labour, South Thanet)

Perhaps I should start by declaring an interest, because I have just realised that my home is equipped for burning renewable fuel, as defined by the clause. I have a beautiful house that was built in 1714. It has a huge inglenook fireplace in which logs are the only sensible thing to burn.

Alan Whitehead (Labour, Southampton, Test)

It is a biomass heat station.

Stephen Ladyman (Labour, South Thanet)

Indeed. Were we to pass the new clause, my excellent log supplier would be able to claim renewable obligation certificates, which he would sell to the local coal merchant and reduce the price of my logs. So I suddenly feel attracted to the new clause.

Having said that, I want to emphasise sustainability. There is always a temptation to think that if 5 per cent. of something is good, 10 per cent. must be twice as good. The European Commission has fallen into that trap, where biofuels are concerned. It assumes that because 5 per cent. can be produced renewably, 10 per cent. must be much better. If it cannot be guaranteed that that biomass is produced sustainably and that someone is not cutting down a rain forest or displacing food production to provide it, the carbon benefit of burning that biomass is negative.

After a lot of soul searching and calculations, the Government concluded that we can be confident of producing 5 per cent. of our transport fuel renewably from sustainable biomass production. They went through a great consultation and put huge effort into getting a set of criteria that will guarantee that the material is produced sustainably. I am confident that the renewable transport fuel obligation, as it stands, will have a sustainable net carbon benefit. Go beyond that 5 per cent., however, either to produce transport fuel or to produce a source of biomass for heat production, and it cannot be guaranteed that that will be produced sustainably. It may be that we can work out a way of doing that in the future.

It is unfair to criticise too much, because the hon. Member for Wealden has made it clear that it is a probing new clause that is intended to stimulate debate. I support that intention. I would certainly like to see better ways of producing heat, but it should not be assumed that biomass and waste, and all the other things mentioned in the contributions, have not already been taken into account in calculating how much renewable transport fuel we can produce. They have been taken into account. We already assume that some of that transport fuel will come from waste sources.

Martin Horwood (Liberal Democrat, Cheltenham)

The hon. Gentleman is knowledgeable on the subject. Is he aware of the analysis by the Swiss Government, who have already set a framework for analysing whether biofuels are sustainable? That analysis places things such as soya and the American wheat industry at the most unsustainable end of the spectrum. Local biomass, however, is by and large sustainable, and makes a positive contribution to carbon reduction.

Stephen Ladyman (Labour, South Thanet)

It may be that for small countries local biomass production can be a sustainable source of biomass. We are not a small country. We already have 34 million vehicles on the roads. Five per cent. of our road transport fuel is a huge amount of fuel and will require a huge amount of sustainable biomass. At this point, nobody is able to guarantee that anything more than that 5 per cent. can be produced sustainably. I agree that there are ways of calculating whether biomass is sustainable, but there is no international agreement yet on any of them. I hope we will have an international agreement soon. Whereas I am four square behind getting my hon. Friend the Minister to think about those issues, and behind moving to a position where we can contribute towards heat production from biomass, I counsel the Committee not to push the Government too fast down that road because they already have a huge task of ensuring that the renewable transport fuel obligation is delivered sustainably.

Malcolm Wicks (Labour, Croydon North)

This has been a good debate. On balance, I would say generously that it has produced more light than heat. I thank my Parliamentary Private Secretary, my hon. Friend the Member for Broxtowe, who, by convention, cannot speak on these occasions, for helping me with that part of the script. I will not follow the hon. Member for Cheltenham and make comparisons with horses and racing. One gets the impression that an event might be taking place near his constituency. I have been so diligent in swotting up for the Committee, I have missed out on exactly what gold cup it is.

We are all very impressed that the hon. Member for Cheltenham has installed solar panels; that is a very worthy and interesting experience. I am bound to say that, given his party’s opposition to most forms of energy, including nuclear and fossil fuels, and given that his party comrades have objected to wind farm after wind farm, I have a horrible feeling that he has installed solar panels out of some optimistic belief that the Liberal Democrats might form a Government and that that will be his family’s only form of heating.

Martin Horwood rose—

Malcolm Wicks (Labour, Croydon North)

I think that the hon. Gentleman wishes to confirm my hypothesis.

Martin Horwood (Liberal Democrat, Cheltenham)

The Minister ought to give way on this. As far as I know, the only form of energy that we have objected to is nuclear. We even support fossil fuel generation with carbon capture and storage. We have supported every form of renewable energy, including geothermal, which the Minister left out of the clause. Geothermal energy is being used viably by Gloucestershire police in its new headquarters and Chelsea Building Society in its new call centre, both of which are in or near my constituency and both of which I supported.

Malcolm Wicks (Labour, Croydon North)

We will leave it there. I suspect that the sporting event that the hon. Gentleman has alluded to on nine or 10 occasions will produce quantities of biomass that might help him with the renewables issue.

Energy consumed for heating accounts for about 40 per cent. of the UK’s primary energy consumption. We have heard about the considerable proportion of CO2 that it produces. Heat is produced and used by a huge number of consumers, ranging from individual householders to very large industrial plants. In thinking about tackling climate change, heat is clearly a sector that we cannot afford to ignore. The Government already have a number of policies in place to tackle emissions from heat, including the European Union emissions trading scheme, energy efficiency measures generally and fuel poverty initiatives.

With programmes such as the low-carbon building programme, the energy efficiency commitment and, in future, the carbon emissions reduction target, we are focusing on improving the energy efficiency of dwellings, thereby reducing demand for heat. A third of the emissions savings estimated from the measures set out in the energy White Paper will result from energy efficiency policies, and much of that will relate to reductions in heat demand. Most of the estimated 100,000 microgenerators in the UK—including our colleague—are using renewable heat technologies such as solar and ground source heating.

Our minds, however, are increasingly focused on renewable heat, particularly given the EU target of 20 per cent. of our energy in Europe coming from renewables by 2020. We need to do more to tackle heat emissions if we are to meet that challenging target. The Prime Minister, in his speech to the WWF in November last year, announced that we will do more and introduce measures as part of the renewable energy strategy next summer.

For that reason, I am sympathetic to the intentions behind the new clause, tabled by the hon. Member for Wealden. It would require the Secretary of State to introduce a renewable heat obligation, which would require suppliers of fossil fuel heating to source an increasing proportion of their fuels from renewables. However, I am sure that the Committee will not be surprised to hear me say that I believe that it is premature to amend the Bill in that way. Tackling carbon dioxide emissions from heat is not straightforward. Any step to encourage greater use of renewable heating options would need to consider a wide range of factors, including the different needs of various customer groups and the large range of technologies available, each of which has different potentials, costs and practical implications with regard to the type of support that would deliver the best outcomes.

We are in the middle of reviewing our policy on heat, and the new clause would pre-empt that work. Last year’s energy White Paper, “Meeting the Energy Challenge”, restated the Government’s commitment to decarbonising heat and to increasing the use of renewable heat. Specifically, we said that we would

“conduct further work into the policy options available to reduce the carbon impact of heat and its use in order to determine a strategy for heat. The work will look at the full range of policy options”.

Since then, the Office of Climate Change, working closely with several Departments, including my own, has undertaken an in-depth study of heat. That project has focused on providing an overview of heat and the cooling sector—air cooling is quite important in this regard—to analyse the carbon impact of heat generation and cooling, to assess the potential to reduce that and to identify and assess alternative or additional policy mechanisms.

On 31 January, the project culminated in the publication of “Heat Call for Evidence”, which seeks further information on which the Government can base the next stage of our work. It outlines our understanding of the opportunities and prospects for renewable heat and examines options for possible financial support mechanisms to promote it, including capital grants, a feed-in tariff and a renewable heat obligation. The call for evidence will feed valuable information and insight into our strategy in 2009.

The call for evidence also considers issues such as how to promote renewable heat, including biogas; the role of low-carbon electricity and heating; how surplus heat can be captured, transported and used, especially where we have a well established gas network; options to reduce the heating needs of existing buildings, focusing primarily on the residential sector; the relationship between the EU emissions trading scheme and heating; the prospects for including heat in existing and proposed carbon markets; the non-financial barriers to the greater deployment of renewable heat technologies that will need to be tackled alongside any financial support mechanism; the potential for district heating; and the possible incentives and regulatory changes necessary for an expansion of such schemes.

Complex issues need to be worked through before we can know that a renewable heat obligation could work or whether it would be the most cost-effective support mechanism for heat. For example, unlike electricity, heat is not supplied directly to end users; rather, they are sold a range of heating fuels. The renewables obligation works because the end product is uniform. That allows us easily to measure how much of it is supplied and to impose an obligation to supply a percentage of it from a renewable source. The situation is not as straightforward with heat.

I do not agree that we should commit the Government to pursuing a particular financial support mechanism for heat, because all the options and implications of implementation have not yet been fully evaluated, and there is no guarantee that the measures that we will propose in the renewable energy strategy could be implemented by the new clause.

My hon. Friend the Member for South Thanet talked about biofuels, and he is a great expert on these issues because of his ministerial experience. I can, in a sense, confirm what he was saying, in that we take concerns about unsustainable sources of biofuels very seriously. The Government’s commitment to biofuels is subject to their being sustainable. The renewable transport fuel obligation is designed to encourage the use of only the right type of biofuels. It will require companies to report on the carbon that the biofuel has saved and the wider environmental impact. We are keen to move beyond that to mandatory standards as soon as we can.

We are introducing similar reporting requirements for the use of biomass under the renewables obligation. We will be able to keep the issue under review through the introduction of sustainability reporting for biomass users. That will enable us to monitor any sudden growth in the use of a biomass fuel and expose biomass sources to public scrutiny. A survey of the scientific evidence on the environmental impact of biofuels, commissioned by the Department for Environment, Food and Rural Affairs, is due to be published shortly.

No doubt, that will be disappointing news to the hon. Member for Wealden, who proposed the new clause. However, as he has indicated, it was probing in nature and has provoked a useful debate. Given the importance of tackling emissions from heat, only once we have finished the necessary analysis will it be appropriate to reach a decision on whether and what type of legislation is necessary. I give no apologies for that, because I am confident that taking the time to consider matters properly will help us to deliver the right policy. Therefore, I hope that the hon. Member for Wealden will consider withdrawing the motion.

Charles Hendry (Conservative, Wealden)

The Minister thinks that I will probably be disappointed by his rejection of the new clause, but I have moved beyond the stage of disappointment during the past few weeks. I have accepted that, however much he may say that he is grateful or sympathetic, he will proceed to say that the amendment or new clause is completely unacceptable to the Government. However, the Minister has made a good case on this subject. As I said in moving the new clause, it is a probing one, because I feel that we need to do more about renewable heat, heat loss and other such issues. It was a way of stimulating that debate, as it has done so. I think that there is overwhelming agreement that more needs to be done.

Malcolm Wicks (Labour, Croydon North)

In a spirit of generosity, I think that the hon. Gentleman was about to withdraw the motion, and I thank him for that. To encourage him further, when I said that the renewable energy strategy would be available next summer, I was being too pessimistic about the speed and energy of my officials. In fact, it will be available next spring.

Charles Hendry (Conservative, Wealden)

I am delighted that my new clause has forced the Minister’s officials to bring forward the case and to work through the night burning all that oil and creating all that heat to provide us with the strategy in due course.

Malcolm Wicks (Labour, Croydon North)

Not oil, but biomass.

Charles Hendry (Conservative, Wealden)

That is more feasible, perhaps, than wind turbines on the roof of the Department.

I am grateful to the Minister for his response. We have addressed the main questions, and some aspects of the idea of a renewable heat obligation certainly need further thought. Therefore, I beg to ask leave to withdraw the motion.

New Clause 11

Charles Hendry (Conservative, Wealden)

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

Joan Humble (Labour, Blackpool North and Fleetwood)

With this it will be convenient to discuss the following: New clause 12—Duties of the regulatory authority —

‘(1) For sections 4AA(1) and (2) of the Gas Act 1986 (c.44) substitute—

“(1) The principal objective 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 is to deliver a secure and sustainable energy system operating within greenhouse gas emission limits notified by the Secretary of State to the Authority in accordance with the provisions of the Climate Change Act 2008 [c. ].

(2) The Secretary of State and the Authority shall carry out those functions in the manner which he or it considers is best calculated to further the principal objective, having regard to—

(a) the protection of the interests of consumers in relation to gas or heat conveyed through pipes, through effective competition between persons engaged in, or in commercial activities connected with, the transportation or supply of gas or heat; and

(b) the need to secure that, so far as it is economical to meet them, all reasonable demands in Great Britain for gas and heat conveyed though pipes are met; and

(c) 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 or the Utilities Act 2000 (c.27).”

(2) For section 3(1) and (2) of the Electricity Act 1989 (c.29) substitute—

“(1) The principal objective 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 is to deliver a secure and sustainable energy system operating within greenhouse gas emission limits notified by the Secretary of State to the Authority in accordance with the provisions of the Climate Change Act 2008 [c ].

(2) The Secretary of State and the Authority shall carry out those functions in the manner which he or it considers is best calculated to further the principal objective, having regard to—

(a) the protection of the interests of consumers in relation to electricity conveyed by distribution systems, through effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electriciy; and

(b) the need to secure that all reasonable demands for electricity are met; and

(c) 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 of the Utilities Act 2000 (c.27).”’.

New clause 13—Access for renewable energy to the electricity and gas grids—

‘(1) After section 3A of the 1989 Electricity Act (c.29) there is inserted—

“3B Access for renewable energy to the electricity networks

(1) In carrying out their respective functions, the Secretary of State and the Authority shall ensure that—

(a) transmission system operators and distribution system operators guarantee the transmission and distribution of electricity produced from renewable energy sources, without prejudice to the maintenance of the reliability and safety of the grid;

(b) transmission system operators and distribution system operators provide for priority access to the grid system for electricity produced from renewable energy sources;

(c) when dispatching electricity generating installations, transmission system operators shall give priority to generating installations using renewable energy sources insofar as the security of the national electricity system permits;

(d) transmission system operators and distribution system operators are required to set up and publish their standard rules relating to the bearing and sharing of costs of technical adaptations, including grid connections and grid reinforcements, which are necessary in order to integrate new producers feeding electricity produced from renewable energy sources into the interconnected grid, and that such rules—

(i) shall be based on objective, transparent and non-discriminatory criteria taking particular account of all the costs and benefits associated with the connection of these producers to the grid and of the particular circumstances of producers located in peripheral regions and in regions of low population density,

(ii) may provide for different types of connection, and

(iii) shall provide for the sharing of costs to be enforced by a mechanism based on objective, transparent and non-discriminatory criteria taking into account the benefits which initially and subsequently connected producers as well as transmission system operators and distribution system operators derive from connections;

(e) transmission system operators and distribution system operators are required to provide any new producer wishing to be connected to the system with a comprehensive and detailed estimate of the costs associated with the connection;

(f) the charging of transmission and distribution fees does not discriminate against electricity from renewable energy sources, including in particular electricity from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population densitiy;

(g) fees charged by transmission system operators and distribution system operators for the transmission and distribution of electricity from plants using renewable energy souces reflect realisable cost benefits resulting from the plant’s connection to the network.

(2) The Secretary of State shall review and take the necessary measures to improve the frameworks and rules for bearing and sharing of costs referred to in paragraph (d) by 30th June 2011 at the latest, and every two years thereafter, in order to ensure the intergration of new producers.

(2) After section 4AA of the Gas Act 1986 (c.44) there is inserted—

“4AB Access for renewable gas to the gas networks

(1) In carrying out their respective functions, the Secretary of State and the Authority shall ensure that—

(a) gas network operators guarantee the transport of gas produced from renewable energy sources, without prejudice to the maintenance of the reliability and safety of the gas networks;

(b) gas network operators provide for priority access to the gas networks system for gas produced from renewable energy sources;

(c) when dispatching gas, network operators shall give priority to renewable energy sources insofar as the security of the national gas system permits;

(d) gas network operators are required to set up and publish their standard rules relating to the bearing and sharing of costs of technical adaptations, such as gas network connections and gas network upgrades, which are necessary in order to integrate new producers feeding gas produced from renewable energy sources in to the interconnected gas networks, and that such rules—

(i) shall be based on objective, transparent and non-discriminatory criteria taking particular account of all the costs and benefits associated with the connection of these producers to the gas networks and of the particular circumstances of producers located in peripheral regions and in regions of low population density,

(ii) may provide for different types of connection, and

(iii) shall provide for the sharing of costs to be enforced by a mechanism based on objective, transparent and non-discriminatory criteria taking into account the benefits which initially and subsequently connected producers as well as gas network operators derive from the connections;

(e) gas network operators are required to provide any new producer wishing to be connected to the system with a comprehensive and detailed estimate of the costs associated with the connection;

(f) the charging of transport fees does not discriminate against gas from renewable energy sources, including in particular gas from renewable energy sources produced in peripheral regions, such as island regions, and in regions of low population densitiy; and

(g) fees charged by gas network operators for the transport of gas from plants using renewable energy sources reflect realisable cost benefits resulting from the plant’s connection to the network.

(2) The Secretary of State shall review and take the necessary measures to improve the frameworks and rules for bearing and sharing of costs referred to in paragraph (d) by 30th June 2011 at the latest, and every two years thereafter, in order to ensure the integration of new producers.”’.

Charles Hendry (Conservative, Wealden)

We are going to try again to persuade the Minister that the new clause contains matters that are not yet included in the scope of the Bill. Even at this late stage, as we reach the twilight of the Committee stage, I hope that the Minister will see the light—if one can see the light in twilight—and recognise that further changes could be made to the Bill.

The new clause relates to the primary duties of Ofgem—again, something that was mentioned many times on Second reading and during the submissions that have been made to us. In 2000, Ofgem was given new duties to contribute to the Government’s social and environmental objectives. In 2004, it was given a duty to contribute towards sustainable development. The new duties were additional to Ofgem’s primary duty, which did not change. In addition to its primary objective, Ofgem has a series of 11 secondary duties.

We have looked at the work being done on the issue by the Sustainable Development Commission, such as its report, “Lost in Transmission?”, in which it made a compelling case about why Ofgem’s remit should be changed. It recognised that Ofgem’s remit needs to adapt to reflect the fact that the world has moved on and the problems that society faces have changed.

We can have a debate about Ofgem’s work to protect consumers—it does a good job and is well led as an organisation—but it is not doing as much as it needs to do to move us towards a system in which we use more renewables than fossil fuels. The UK currently generates 5 per cent. of its electricity and 2 per cent. of its energy from renewables, compared with 12 per cent. of electricity and 5.8 per cent. of total energy generated from renewables in Germany.

A huge number of onshore wind applications are stuck in the planning system. If the UK is to achieve its target of 15 per cent. renewable energy by 2020, between 35 and 40 per cent. of all electricity must come from renewable sources. That will not be achievable without a concerted effort and a clearer direction to Ofgem about the work that it must do.

In addition, there are considerations that relate to connectivity to the national grid, which could also be addressed by reforming the primary duties for Ofgem. An enormous amount of the national grid network is reaching the end of its lifetime and will need to be replaced. At the moment, Ofgem is required to connect new installations in the order in which the applications are made. So it is connecting some wind farms that might not get planning consent for some years, but others, which have been given planning consent, will not be connected to the national grid for some years to come. Clearly, that does not make sense as a coherent strategy. Ofgem should have more powers to intervene and to suggest that installations should be connected in an order that reflects their viability and the extent to which they can make a contribution to promoting renewables.

The WWF, which the Minister quoted in relation to the Prime Minister, said:

“The remit of Ofgem was established before the urgency of climate change became clear. WWF believes its primary remit should be updated to include efforts to reduce carbon emissions in the energy sector.”

Similarly the Sustainable Development Commission has recommended that Ofgem’s duties should be changed to include strong reference to greenhouse gas emissions reductions.

The Royal Society for the Protection of Birds said that the Bill should

“Reform the gas and electricity regulator... so that its primary purpose is the protection of the environment and customers.”

The Energy Saving Trust said:

“Ofgem’s current primary responsibility to promote effective competition in the energy sector means it does not promote increased energy efficiency and renewables as much as it could. Ofgem’s remit should be altered by the Bill to include a primary responsibility for the delivery of a low carbon energy system”.

The British Wind Energy Association said:

“Ofgem’s interpretation of its rules mean National Grid cannot invest in upgrading connection and cabling for new wind farms until developers are able to underwrite their costs. Companies are unable to do this until their schemes are approved and they have secured finance, which can take several years: under current arrangements they would then have to wait further for grid upgrades before they can generate. Ofgem fears that early investment in system reinforcement would result in stranded assets being built... We believe that Ofgem must be more strongly directed to give higher priorities to tackling climate change and increasing security of supply alongside itself economic focus.”

When the Sustainable Development Commission produced its report, it proposed three options, one of which was to create a primary duty for environmental matters and climate change issues and to put that ahead of consumers’ interests. That is a difficult position to sustain in the current climate, when we are all concerned about fuel poverty and how people will pay their bills. There must be a continuing primary duty to protect consumers. The SDC also suggested an option whereby those issues would be viewed in tandem. New clause 11 would add to its primary duty about protecting consumers and includes the words,

“while reducing the emissions of greenhouse gases in accordance with Government targets for greenhouse gas emissions reductions”.

A clear body of opinion sees that as the right way forward.

The SDC has looked into this in great detail, and I hope that the Minister will be able to respond positively to the new clause and recognise that we need to address this matter to meet our climate change objectives. We are reaching the final moments of the Committee. The prospect that we are soon to be released is almost like Christmas. We therefore ask the Minister to give us that little Christmas present—that final little nugget after weeks of saying no in the Gallic manner—and say, “Yes, here’s an issue that we can support. Here’s an issue that we should rally round,” and accept the new clause.

Alan Whitehead (Labour, Southampton, Test)

I want to speak to new clause 12, which is a more comprehensive version of new clause 11, tabled by the hon. Member for Wealden. I would not characterise these as Christmas clauses, but rather as owl of Minerva clauses, in that the best bit comes just before the ending. In that case, it was Greek civilisation, but we will not go down that road.

The purpose of new clause 12 is simply to reverse the subsidiary nature of the clauses within Ofgem’s remit, which concern sustainability and environmental obligations, and place them as a principle objective. Rapid progress is being made to ensure that our future energy concerns relate to climate change, sustainability, renewable energy and the use of other forms of energy, either more economically or through the use of technologies that make them more sustainable.

The idea that the energy regulator is tasked to ensure that that is a primary consideration is very important. It is also important because Ofgem has suffused the considerations of the Committee—it has a very important role and undertakes a whole range of activities that relate to grid connections, the operation of the energy market, arrangements that relate to renewables and all sorts of similar matters. Therefore, having a primary duty to do that is important, but of course I recognise and understand that simply to do so would be to fundamentally disrupt the range of considerations that Ofgem should properly take into account.

Consequently, in furtherance to its principal objective, new clause 12 lists a number of considerations that Ofgem should have regard to, which will effectively fall within its primary duty. At the moment, that duty is set out thus:

“to protect the interests of consumers, present and future, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the shipping, transportation or supply of gas conveyed through pipes, and the generation, transmission, distribution or supply of electricity or the provision or use of electricity interconnectors.”

As hon. Members will understand, those elements of the primary duty would be reflected in the things that Ofgem should consider in pursuit of its primary objective—it is effectively a tandem arrangement as far as those objectives are concerned.

The issue is certainly beyond serious dispute, but there have been some difficulties, not necessarily because Ofgem is a perverse organisation that does not want to pursue environmental objectives, but rather because of the way in which its duties and powers are set out. The hon. Member for Wealden mentioned some of those difficulties in relation to the connection of transmission for renewables and various other activities, and I believe that they have resulted from the subsidiary nature of the contribution to the achievements of sustainable development in Ofgem’s present remit. That is a result first of the systematic undervaluing of carbon by Ofgem in its calculations of what is meant by significant financial implications and because of Government guidance from 2004, which was supposed to help Ofgem in its interpretation of social and environmental issues, but which probably had the opposite effect.

In their guidance, the Government stated:

“where the Government wish to implement social and environmental measures which could have significant financial implications for consumers or for regulated companies, these will be implemented by Ministers, rather than the Authority, by means of specific primary or secondary legislation.”

The interpretation of what is a “significant financial implication” in the context of Ofgem’s primary duty has led to conclusions that do not advance the question of sustainability and environmental management in the way that is increasingly becoming imperative in the management of energy supplies. At the very least, I hope that my hon. Friend the Minister, in replying to these questions, will consider whether there should be new guidance for Ofgem, because I do not think that the guidance does the job that it was originally intended to do; indeed, it could have perverse consequences for Ofgem’s overall role.

Finally, I emphasise that the idea of setting out principal and subsidiary objectives in the way that is set out in new clause 12 is not unique for regulators. Indeed, the rail regulator has a duty to contribute to sustainable development that ranks alongside the duty to promote competition and is not subsidiary to it. Therefore, regulators can work within a competitive environment with that duty; rather, such a framework of duties can probably contribute to the development of a workable and competitive environment, while sustainable objectives are pursued, in the way that I imagine everyone on the Committee wants us to proceed in respect of energy management.

Steve Webb (Liberal Democrat, Northavon)

The Liberal Democrats have a lot of sympathy with the goals in new clauses 11 and 12, which touch on the same issue—Ofgem’s remit—and goals as new clause 13, which has not been discussed even though it is grouped with new clauses 11 and 12, so I assume that it is in order to refer to it.

Clearly, there are two slightly different approaches to Ofgem’s remit. There is a more comprehensive approach from the hon. Member for Wealden in new clause 11, which seems to be more effective, because it appears to cover both gas and electricity legislation, and I sense that it might be preferable to the other approach. Nevertheless, the goal of both approaches seems to be right. We all know that, if we have one primary duty or one priority, we will focus our attention; if we have 10 priorities, we have no priorities. My worry with the current Ofgem structure is that the primary duty overrides and that, when there is a conflict between the primary duty and the subsidiary duty, the primary one, by definition, dominates.

From our point of view, sustainability and adherence to greenhouse gas targets are not at all subsidiary matters—this is the future of the planet, for goodness’ sake. The idea that sustainability is a subsidiary consideration—I hesitate to say that it is an afterthought, but it is certainly a subsidiary consideration—just seems wrong to us.

We agree with the Sustainable Development Commission’s suggestion that Ofgem’s primary duty should be aligned to Government energy and environment policy; why would it not be aligned to it? The fact that there could be disjunction between the two suggests that change to the remit is needed. In passing, I note that the Sustainable Development Commission also recommends that energy and environment policy should be handled by one Secretary of State; having a view on that may be above the Minister’s pay grade, but it is a very good recommendation and one that we have implemented in our party.

The question that we have not yet considered is what does Ofgem think of all this. Obviously, Ofgem would not dream of trespassing on party political matters, but it produced a briefing for us, called “The Role of Ofgem in a Changing Climate”, in which it said that these are obviously matters for politicians and Departments to decide, but it then came up with a raft of reasons why we should not change its remit. One of the reasons that Ofgem gives in the briefing is that we should judge it by its actions on sustainable energy networks and markets. It lists a set of bullet points of things that it has done, saying that it has advised the Government and promoted choice. However, I cannot help smiling because one of the actions that we are supposed to commend it for is its

“Leadership role on smart metering, including overseeing Government backed 10m trials (ongoing since 2005).”

I cannot help feeling that, if the remit for sustainability and greenhouse gas emissions had been primary rather than secondary, a three-year smart meter trial might have led us to some action. In a sense, it is probably unfair to criticise Ofgem for that; it has simply administered the Government’s trials. However, in no sense has it been driving smart metering forward, although I am sure that it has done a very competent job of administering trials.

Perhaps I am pointing the finger in the wrong place and pointing it unfairly at Ofgem. However, I just think that perhaps it would have been pressuring Ministers and saying, “Look, we have got a remit to fulfil. We are supposed to be promoting sustainable energy. You are dragging your heels on smart meters. How about pulling your finger out”—metaphorically—“and getting on with it?” If Ofgem had been given that remit, there might have been more pressure on the Government to act on some of these issues. Therefore, of the two new clauses, new clause 12 probably gets closest to the mark, but we would very much support the spirit of those people who put sustainability and curbing greenhouse gas emissions right up there, in the headlines, at the top.

Briefly, new clause 13 is about preferential access to the grid for renewables. A brief reference was made to that earlier and again it is something that we support. The danger is that the grid currently picks off the cheapest marginal source of supply. If we are serious about getting renewables into the mainstream, rather than having them as just a peripheral additional supply, some sort of preferential arrangement would complement what we have been talking about under the Bill, such as the renewables obligation. It will be interesting to see why the Government have not adopted that approach. I hope that the Minister will be sympathetic to it.

Alan Whitehead (Labour, Southampton, Test)

I am conscious that I tabled new clause 13, but have not moved it. I wish to do so.

Joan Humble (Labour, Blackpool North and Fleetwood)

I remind the hon. Gentleman that he is not moving the clause but speaking to it. His new clause has been grouped with new clause 11.

Alan Whitehead (Labour, Southampton, Test)

I am conscious, therefore, that I should have spoken to new clause 13 when I spoke to new clause 12. I apologise that I failed to do so. I will not detain the Committee for any length of time other than to commend the idea about grid connections.

Clause 40, which we discussed what seems like a very long time ago, made great strides on the grid connection for offshore renewable energy. I welcomed the Minister’s verbal indication of further consideration over whether there should be a hub-and-spoke arrangement for future grid connections as the offshore grid develops. I also note the proposed clauses in the marine Bill White Paper concerning how permissions for offshore grid connections will be undertaken. Nevertheless, problems will continue to arise upon landfall in the way that they currently exist for connections for land-based wind farms.

There is the so-called Scottish queue of something like 9 GW of potential power that remains to be connected up because of the considerations relating to how connection is undertaken. Viable schemes that can proceed have a lengthy period of waiting prior to going online because the capacity of the grid is taken up by existing operators. Those operators reserve elements of the grid according to their capacity operation, which does not necessarily take place.

Elements of the grid for dealing with potential grid failures are normally not used because failures to the grid are reducing considerably. Therefore, a connection and management regime on the basis of that marginal, additional capacity according to the priorities set out in new clause 13 would offer a very positive way to deal with grid connection problems.

The clause prioritises renewable connections, but the effect would be to ensure that the way that the grid connection arrangements were laid out meant that the full management capacity of the grid was used in parallel, rather than in sequence. Therefore, that would cause the grid to be used in a much more efficient way and bring on the considerations of how the grid is strengthened—at what point on the grid new connections are landed and how they go into the high-power grid.

For all those reasons, I hope that my hon. Friend the Minister would look carefully at the considerations in the new clause. I anticipate that he will suggest that it might be withdrawn, but it is on the amendment paper, in part, at least to underline that we have to get grid connections right in the future, so as to bring out the benefits of renewables, which are underlined by the Bill and are essential to our future targets.

Malcolm Wicks (Labour, Croydon North)

This matter has occasioned a lot of parliamentary and wider interest, so it is useful that we have had a good discussion. There are three new clauses here, so I am afraid that it will take a little while for me to present my analysis.

The hon. Member for Wealden, hoped that, at this late hour, I would be able to satisfy him. My endeavour is to satisfy him; I want to make him happy. I am sure that during the course of my speech, I will do that, but with only one small, rather specific and technical qualification, which is the tedious business, sadly, of my not being able to accept his new clause. Apart from that, I think that he will be satisfied.

We have heard a lot in the debate as to whether the duties and powers of Ofgem—I mean here the Gas and Electricity Markets Authority—are still fit for purpose in the light of the challenges that we face to meet our EU 2020 targets. New clauses 11 and 12 in particular attempt to address what some hon. Members feel is perhaps an imbalance in Ofgem’s overall focus. Before I cover the specific issues raised by new clauses 11 and 12, I thought it might be helpful if I took the time to remind the Committee of the rationale for having an independent economic regulator for the electricity and gas markets.

The Government are committed to delivering safe, secure and sustainable energy supplies through independently regulated energy markets, promoting competition where possible. Ofgem has been specifically established as the independent regulator, with consumer protection and competition as its primary duty. The intention of independent regulation is to provide the regulatory stability necessary for investor confidence through independence from Government and a clear statutory framework; to introduce competition into the market wherever possible; and to regulate the prices of any natural monopolies, such as networks, where not.

Investments in the gas and electricity industry, be it networks or generation, are generally long term and returns are made over a long period. Once the investments have been made and the infrastructure built, it can be costly for companies to pull out. It is the combination of Ofgem’s independence—which demonstrates that regulatory decisions about the market will be made for the long term on an economic, not a political, basis—and a clear statutory framework of duties in which to take its decisions that provides companies with the stability and regulatory certainty that they need to invest with confidence in the power stations, gas infrastructures and electricity networks that we need in the UK.

A competitive market with sufficient, timely investment brings benefits for consumers by providing the most cost-effective way of delivering our energy objectives of tackling climate change and ensuring secure supplies of energy. Ofgem also regulates prices in elements of the gas and electricity system that are natural monopolies. That ensures that the owners of the pipes and wires do not abuse their monopoly power and helps to drive efficiencies in the system. As part of that, Ofgem sets price controls to limit the charges for access to those networks and provides incentives for the companies regarding investment and service. That helps to ensure that costs to consumers are minimised as far as possible.

Changing the nature of Ofgem’s remit so that it will no longer primarily be an economic regulator, as new clause 12 proposes, without sufficient analysis of the potential impact on the broader market and other unintended consequences, would be imprudent. Placing sustainability above consumer protection and competition would take Ofgem’s primary focus away from the latter. I have already discussed some of the reasons why we believe that it is important that Ofgem retains its economic focus. Moreover, the new clause proposes giving Ofgem a primary duty to deliver sustainability, but no practical powers or tools to make it possible, as many of the important policies such as the design of the renewables obligation and other trading schemes are the remit of Government, and rightly so.

A recent Select Committee report in the other place on regulators concluded that they are “creatures of statute”, and that therefore, an effective statutory remit for a regulator is one that is, above all else, clear. The report also concluded that regulators need limited and relatively narrow duties.

A dual primary duty, as suggested in new clause 11, would require Ofgem to make trade-offs between the economic interests of consumers and promoting sustainability. How, for example, would Ofgem be able to decide what should take precedence when making decisions about whether to encourage renewable technologies, which are generally more expensive, or to keep costs down for consumers to minimise fuel poverty? It is only right for an elected Government to make the political decisions about such matters. That is why the Secretary of State provides guidance to Ofgem on social and environmental policy, to which Ofgem must have regard. In light of significant developments in this area since the guidance was last updated, we intend, as the Secretary of State announced yesterday, to consult on new environmental and social guidance for Ofgem shortly.

The guidance will set out the Government’s expectation of the contribution Ofgem should make on social and environmental issues. It will cover issues such as facilitating the faster deployment of renewables, both on and offshore, and the development of local or distributed energy. On the social side it will, among other things, address our expectation that Ofgem will take a strong lead in co-ordinating activity to help low-income and vulnerable customers.

Rather than a knee-jerk reaction to change Ofgem’s remit and duties we should step back and look at what the potential barriers to deploying more renewables actually are. Stakeholders have highlighted several key areas of concern in relation to the deployment of renewables, particularly around grid access, transmission and charging. Some point to Ofgem’s remit as the cause, but that oversimplifies the problem. The grid-related issues are complex and interconnected and rather than believing that we can solve them at a single stroke by changing Ofgem’s remit, we need to develop a more rounded strategy.

That is why we are developing our renewable energy strategy, which we have discussed, to be launched in Spring 2009. As part of that we will be launching a consultation this summer that will consider what more we should do to increase renewable energy production to meet our share of the EU 2020 renewables target, including how we can ensure renewable projects secure swift connection to the grid. We need to look at the rules governing access to the grid and at ways of speeding up the delivery of new infrastructure. We need to be sure that the grid as a whole is equipped to handle significant increases in largely intermittent renewable generation.

Steve Webb (Liberal Democrat, Northavon)

A few pages back, the Minister described changing Ofgem’s remit as a knee-jerk reaction, but would he not accept that the Sustainability Development Commission, which was set up by his Government, has recommended this in a thoughtful, multi-page report after many months of thinking about it? Is he saying that its approach is knee-jerk? Would he not accept that there is a rigorous, carefully thought through case for doing this?

Malcolm Wicks (Labour, Croydon North)

I was not talking about the SDC’s report, which, as ever from the SDC, was an important document. That does not mean that we always have to agree with independent commissions.

Steve Webb (Liberal Democrat, Northavon)

It is not knee-jerk.

Malcolm Wicks (Labour, Croydon North)

No, I did not say that that report was knee-jerk. Some people think that changing Ofgem’s responsibilities is the sole answer to these problems and I would describe that as knee-jerk, but not the SDC. When we more fully understand the issues and barriers in the context of a much more ambitious renewables target—and the best way to overcome them—we can make any changes needed to deliver the outcomes.

Ofgem already has a secondary duty on sustainability, and has been criticised for not delivering on that. That is unfair, in the light of the work that it has taken forward on a number of projects. For example, Ofgem and my Department are already working on incentives for energy businesses to be innovative in terms of sustainability and reducing greenhouse gas emissions and losses of gas and electricity, through their price control work. Ofgem is also working with my Department on other projects, such as the important transmission access review.

In summary, there are strong reasons for retaining Ofgem’s focus on consumers and competition. However, we know that, as well as updating its guidance, there is further work to do in understanding the potential barriers to deploying more renewables—grid-related issues, for example. Those barriers will be considered as part of our strategy for meeting the European 2020 target.

Charles Hendry (Conservative, Wealden)

Can the Minister tell us what the time scale for the consultation process will be? It could clearly go on for some time. It is six months since the SDC produced its report and there has therefore been a good opportunity to look at the issues in that report and take account of its recommendations. Will the consultation be over quickly or could it take a long time?

In relation to that, changes to Ofgem’s primary duties would require primary legislation, unless the Minister were to include in the Bill powers to change those duties by secondary legislation. Is he prepared to table an amendment on Report, or in another place, that would allow the duties to be changed by secondary legislation, if that were what his consultation concluded?

Malcolm Wicks (Labour, Croydon North)

To clarify, is the question about the time scale for the new guidance for Ofgem? Sorry, I may have misunderstood.

Charles Hendry (Conservative, Wealden)

The Minister said that the Government were about to consult on the process for giving more powers or changing the remit. How long will that consultation take?

Malcolm Wicks (Labour, Croydon North)

We will consult in the spring and expect to issue new guidance by the end of 2008.

Can I go on to new clause 13? Tempting though it would be to accept the new clause, we wish to resist it. The new clause seeks to provide priority access for electricity and gas produced from renewable energy sources to the electricity and gas transmission and distribution systems. The new clause places new duties on the Secretary of State and the authority, which would govern how they discharge their functions under the Electricity Act 1989 and the Gas Act 1986, as amended.

The proposed text on access for renewable energy to electricity networks is taken from the draft EU renewables directive, and many of the provisions referred to in the new clause were contained in the 2001 renewables directive. Those provisions are already in place in Great Britain through licence conditions and underlying industry codes. The key difference is that the new clause would introduce a requirement to mandate priority access to the grid for electricity from renewable sources. That is currently a discretionary matter for member states. Although gas is not covered in the EU renewables directive, the text has also been applied to gas through the proposed new section 4AB in the new clause.

I will first address access for renewable energy to the electricity networks, and then access for renewable gas to the gas networks. We are giving careful consideration to the merits of prioritising renewable access to the grid, and we need to address a number of issues. First, there is some uncertainty about the meaning of priority access in the national context. It is important that we do not introduce uncertainty for existing generators and those planning future investments. We need to be careful not to discourage essential investment in all generating technologies.

The next consideration is whether priority access is consistent with our wider energy policy goals, and whether it is the best route to accelerate growth in renewable generation and integrate what is largely variable generation into the electricity networks, while keeping those networks safe and reliable. Offshore and onshore wind generation is likely to play the largest part in meeting our renewable energy targets in 2020. To accommodate such variable renewable generation, it will be essential to have a significant amount of responsive back-up generation to maintain system reliability. A mixed-generating profile is therefore consistent with, rather than opposed to, our ambitions for renewable generation.

We need to ensure that the access regime encourages essential investment to come forward. If conventional generation were displaced because of the prioritisation of access for renewable generation for a period of time, or if new investments in reserve capacity were not made, there are foreseeable difficulties for maintaining a reliable electricity system. We are considering reforms to grid access arrangements to ensure that the regulatory framework remains fit for purpose in the medium and longer term, and to speed up the connection of renewable generation as part of the transmission access review with Ofgem. An interim report of the review has been published and my Department and Ofgem are working towards a final report in May 2008. We will work further on the matter as we work with industry to deliver the conclusions of the review and as we develop the renewable energy strategy. That may mean bringing forward, in the strategy, further measures to speed up the connection of renewable generation. Clearly, if we decide that the Commission’s proposals for priority access as set out in the draft directive is the right approach, the proposals will be implemented in the UK.

On the second part of proposed new clause 13, the Government are keen to support and investigate the potential of renewable gas to contribute to the UK’s share of our European target. Renewable gas, or biogas, is produced by feeding organic material such as food waste, sewage sludge, animal slurries or energy crops into an anaerobic digestion plant—if my intelligence is right, such a plant is currently the subject of some controversy in Ambridge—or from the decomposition of organic matter in landfill sites. The Department for Environment, Food and Rural Affairs has recently announced that £10 million will be made available for the construction of new commercial-scale anaerobic digestion demonstration plants. By removing carbon dioxide and other impurities, biogas can also be used to make biomethane, which could, theoretically, be injected directly into the gas networks. However, there are a number of challenges to address before it is possible to inject biomethane directly into networks in the UK, such as standards for quality and pressure.

The “Heat Call for Evidence” invites contributions on the potential of biomethane, the barriers to its deployment and how best to tackle those. It is essential to consider the responses to that and to feed our considerations into our broader work on the renewable energy strategy. Moreover, until we have reviewed the evidence on how to get biomethane into the gas system, we will not be able to judge what potential unintended or undesirable consequences might flow from the somewhat ad hoc change to the duties of the Secretary of State and the authority proposed by the new clause. Therefore, the kind of market-enablement that the new clause would provide seems entirely premature.

As I have said throughout this process, we should not make significant changes to a regulatory framework without careful consideration of the consequences. We cannot simply add powers and measures to the statute purely because we happen to have a legislative opportunity.

I should, however, say more on the connecting of renewables. There is currently a queue of projects at various stages of development, mostly in Scotland. National Grid is developing a suite of measures to ensure that available connection capacity is offered to the projects that are best able to connect early, which is to say those with planning consent. That is in line with the objective described by the hon. Member for Wealden to connect the most viable projects first.

I hope that I have said enough to assure hon. Members that there is no lack of interest in renewables that leads me resist the new clause—far from it. However, if we are to develop the UK’s contribution to our European target, we need a comprehensive strategy, not a variety of piecemeal ones.

I believe that important considerations of system reliability and investor confidence need to be addressed before we can conclude that priority access is in itself the right way forward to accelerate the growth of renewable generation. The draft EU renewables directive is, of course, still subject to negotiation between member states. It would not be appropriate to transpose the draft text under discussion into the Bill. When the negotiations have concluded, the finally agreed directive will be transposed into legislation in the United Kingdom in the usual way. In the light of those comments, I ask members of the Committee to withdraw the new clause.

Charles Hendry (Conservative, Wealden)

It was clearly too much to hope that the Minister’s stony heart would melt at this last moment in our proceedings. It made me think of my little boy who was sure that he would get a PlayStation for Christmas, but found that he had been given a dictionary, and burst into tears. The Minister’s response was in the same vein. Nevertheless, it was not wholly unexpected. It is a happy coincidence, however, that the day before we reached such a debate in Committee the Secretary of State announced a consultation process on the way forward. At least, we can feel some joy at the fact that we might have advanced that consultation process.

Malcolm Wicks (Labour, Croydon North)

The hon. Gentleman has been so kind and understanding. I just want to make matters clear. I am sure he understands that we are consulting on Ofgem’s guidance, not on Ofgem’s remit.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for explaining matters. Clearly, such a process would not therefore require primary legislation to change it. Given that we have waited some time for an Energy Bill to be published, it is frustrating to know of the number of measures that have been put out to consultation. They really should have been dealt with before we reached this stage and thus included in the Bill. Nevertheless, we shall reflect on matters further, and take soundings from the SDC and other interested parties about what they think will be the appropriate way forward. We reserve the right to bring the provision back perhaps as a new clause or an amendment on Report. In the light of what the Minister has said, it would be inappropriate to press the new clause to a Division now. Instead we shall reflect further on the best way forward. I beg to ask leave to withdraw the motion.

New Clause 15

New Clause 25

Malcolm Wicks (Labour, Croydon North)

This is an exciting and useful moment, and I will now have to fill my days with other tasks. As I am flying to Tokyo tomorrow for a Gleneagles follow-up meeting of Energy and Environment Ministers, I do not think that I will not have too much time on my hands.

May I first thank you, Mrs. Humble, and your colleague, Mr. Amess, for the way in which you have presided over the Committee? You have done so most effectively, with the appropriate combination of sensitivity when we have strayed and iron discipline.

I would also like to thank our Clerks, those who work for Hansard and the police, who have not been overburdened with disciplinary problems. In particular, I would like to thank fellow members of the Committee, as proceedings have been an efficient, well-informed, and at times, highly intellectual. I noticed that The Guardian reported a little discussion that we had about the beautiful island of Alderney, which several of us took part in. I think that it was suggesting that that discussion did not show a high intellectual content for the Committee. I do not think that it reported anything else we said, which might say more about The Guardian than it does about the Committee.

I think that there has been a great deal of decency in the Committee and a great deal of give and take, if I can put it that way.

Charles Hendry (Conservative, Wealden)

What give?

Malcolm Wicks (Labour, Croydon North)

I have taken a great deal of understanding and patience from all members of the Committee and given away as little as possible, which was entirely satisfactory from my point of view.

I would like to thank my civil servants and officials, who from time to time have been useful on those rare occasions when the immediate answer was not to hand, and I also thank those in my private office for all their help.

I would like to highlight the fact that we have had a wide-ranging discussion on the topics and clauses and how thoroughly we have discussed the clauses to ensure that all the key issues and policies were debated, so that the Bill was scrutinised most thoroughly. I now look forward to further discussion on the Bill on Report. That might be a short discussion, but if I have not entirely satisfied Opposition Members or Members on my own side, it might be a lengthy discussion, which I certainly look forward to. Once again, Mrs. Humble, I thank you.

Charles Hendry (Conservative, Wealden)

I shall echo many of the comments that the Minister has made. I obviously differ with him on the concept of give and take, as his is not quite the concept of give and take that I have been familiar with—the giving was not as evident as one might have thought it should be.

I also echo the Minister’s thanks to you, Mrs. Humble, and to Mr. Amess, for the way in which you have chaired our proceedings. You have been very generous. There have been occasions when we have erred and strayed a little from the direct content of the Bill, and you were very kind at times in allowing us to go as far as we did. That enabled us to address some of the wider issues connected with energy that were not directly included in the Bill.

I also thank the Minister for the way in which he has responded on most occasions. Not a single comma has been changed in the Bill as a result of the amendments put forward by the Opposition, but nevertheless he has always told us how grateful he has been for our contributions. He even said on one occasion that it was a genuinely interesting and useful debate, which I imagine meant that all the rest were not. He has been good humoured and very well supported. Perhaps I can go further than he has done in expressing gratitude to his officials. I just hope that he is there the next time a note comes from them saying, “I’m damned if I know. You’re on your own now, matey.” He will remember that particular moment for the way in which he put his thoughts to them.

I would like to pay particular thanks to the Clerk as well. We turned up in his office with a range of ideas that he had to phrase in an appropriate way to include in the Bill. Any mistakes can be blamed on our concepts or our way of presenting them. We are very grateful to the Clerk and his team for their work. He has been unfailingly helpful and good natured. At times, he was probably despairing, feeling that we should know more about parliamentary procedure than we did.

May I express particular thanks to my colleagues for their interventions? We have had a very well qualified Committee, which has shown a tremendous understanding of the different energy issues. I also want to thank my colleagues for making useful contributions to our proceedings. My hon. Friend the Member for St. Albans made particularly useful contributions in the form of Polo mints, sweeties and other things to keep us going. When her supply ran out, we had to turn to my hon. Friend the Member for Northampton, South for Strepsils. My hon. Friends have also brought a great deal of knowledge and analysis to the Committee, which is what this Bill required.

I am grateful, too, to those from outside—the business, environmental and consumer groups—for their help in ensuring that we understood their concerns. I hope that we have been able to give a fair hearing to those issues, even if the votes did not ultimately show that. People will pore over these exchanges in years to come—the Minister looks worried about that. They will realise that there are other issues to which they must return. For example, last week I made a comparison in relation to tidal power off Portugal. I said that it was a bit like saying that the England rugby team had beaten Andorra; hooray, I think that they would be delighted to beat Andorra. It would be quite a breakthrough for them to be able to do so. Perhaps some of the comments will bear revisiting in the years to come.

The evidence sessions were very useful and extremely constructive. It is a change in parliamentary procedure that is useful to all of us. At the end of the day, this Bill has sadly been unchanged. Our concern was not about the failings within the Bill itself—it is not so much an Energy Bill but more a Bill about facilitating nuclear power and considering decommissioning arrangements—but about the fact that a range of energy issues that are deeply important to our country have been left out.

A whole range of consultations are taking place. I am surprised that the Minister has time to go to Tokyo when he has so many consultations. We are left with a consultation on microgeneration, decentralised energy, feed-in tariffs, smart meters, Ofgem and its duties, and priority access to the grid. All those issues could have been included in the Bill, but sadly have not been. We will have to go back to them on Report. This was a great opportunity to address some of the wider issues but I assume that another energy Bill will come along soon to include the things that have not been covered in this one. However, it has been a joyful experience to be involved in this Committee. Perhaps it has been slightly frustrating at times, but I thank the Minister for his approach, which has made these weeks and our discussions entertaining, enjoyable, but not always fulfilling.

Steve Webb (Liberal Democrat, Northavon)

I very much echo the spirit of the hon. Gentleman’s remarks. I suppose with this Department, a Public Bill Committee has to be “BERR-able” rather than bearable, and it certainly has been that. I reinforce the words of thanks that have already been said to you, Mrs. Humble and Mr. Amess, and to the other members of the Committee. I have sat on Public Bill Committees in the past in which Labour Back Benchers were told to sit there, shut up and stick their hands up at the relevant moment. We have been delighted to hear the expert contribution from those on the Labour Back Benches. They have been willing to put their names to amendments, and we hope to see more of that in the coming weeks. I have enjoyed the knowledgeable and humorous contributions of the hon. Member for Wealden, who outed himself as having read The Guardian for 30 years. There is hope for him yet.

I thank my hon. Friend the Member for Cheltenham for paying a very active part in the debates, particularly on the nuclear issues, when he was not checking his mobile phone to see who had won the 3.15 at Cheltenham. I have to admit that he was doing that this afternoon. I thank the Minister for the initial way in which he encouraged us to contact him and his officials so that we could have an informed debate. I think that his officials got their own back, because when my hon. Friend asked for some follow-up on an issue, he was supplied with a briefing. The purpose of that was to keep him quiet for the next few weeks, which is a cunning new ploy.

Malcolm Wicks (Labour, Croydon North)

It is a mistake to read it.

Steve Webb (Liberal Democrat, Northavon)

As the Minister has demonstrated.

The most remarkable thing about this Bill is that most of the interest is in what is not in it. We have, therefore, appreciated the selection of amendments and the ability to raise such important issues. Most of what we have wanted to talk about has not been in the Bill, but perhaps should have been. However, we appreciate almost everything that we have been able to talk about. We look forward to renewing our debate. The Minister and the hon. Member for Wealden have implied that there will be another energy Bill and energy Bills are like London buses in that more are coming. I suppose that we could say that they are renewable. I look forward to having similar civilised but more amending debates in the future.