Colleagues may remember that I gave notice on Second Reading, during a passage when I spoke about the need for greater competition in the energy markets, that I would move an amendment to try to reinforce what is in the Bill. I will come to the amendment in a moment, but before I do, I ought just to say that it is perfectly clear that greater competition is at the heart of what the Government are aiming at. I have a letter here written by the former Minister for Energy, my right honourable friend John Hayes, to a company that has been seeking to break into the energy market. It states that,
“a competitive market is key to the Energy Market Reform programme”.
I agree with that, but his were not the only words. On 12 June, when there was the announcement from Ofgem of the opening up of the electricity market to effective competition, the right honourable Edward Davey, Secretary of State, said:
“I want our energy market to be as competitive as possible. An increased role and level playing field for independent suppliers and generators is precisely what will help drive the competition that delivers better value for consumers and businesses”.
That is what we are aiming at here. This is the first of what I suspect will be a number of amendments which have been tabled to open up greater competition in the energy industries.
If one looks back to the Electricity Act 1989—I see that an amendment in the name of those on the Labour Front Bench which has been grouped with mine refers to it—Ofgem is obliged to protect the interests of consumers and promote effective competition. However, there is nothing there or in the Bill which makes it clear that that, too, has to be a duty of the Secretary of State. Ministers have said that they want to promote more competition but there is nothing in the Bill that lays any kind of duty on the Secretary of State to do that.
We are moving to discuss the capacity market now, which, interestingly, used to be called the capacity mechanism. Happily, “market” begins with the same letter, M, so it has been transmuted into the capacity market. Even its name suggests the market has to be a competitive institution. Of course, we now know that there will be auctions rather earlier than had originally been envisaged. The auctions will happen next year but they are seen by many in the industry as a way not only to ensure greater security of supply—and there is no doubt that right at its heart, the capacity mechanism is all about making sure that we have the generating capacity to meet the demand from time to time—but to provide a way in for independent producers to join the market and to compete for contracts under the capacity mechanism.
This is the first amendment that we are dealing with under the general heading “Electricity Market Reform”. If one looks at Clause 5(2), listed there are the matters to which the Secretary of State must have regard when exercising his functions. My noble friend Lord Deben will no doubt be delighted to see that the first is,
“the duties of the Secretary of State under sections 1 and 4(1)(b) of the Climate Change Act”.
Secondly, there is a reference to the “decarbonisation target range”. Thirdly, there is,
“ensuring the security of supply to consumers of electricity”,
which is right at the heart of one of the three main aims of the process. The fourth matter is,
“the likely cost to consumers”,
and the fifth is,
“the target set out in … the renewables directive”,
for the,
“use of energy from renewable sources”.
There it stops, but the amendment in my name and that of my noble friend makes it clear that we need something more. We want an additional paragraph at the end to say,
“the desirability of promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity or the provision or use of electricity interconnectors, wherever appropriate”.
The amendment perhaps goes a little wider than I indicated when I gave notice that there would be such an amendment in Committee. It has been the product of much consultation with firms which are anxious to play their part in the new electricity market but so far have found it extremely difficult to break into it. I will not repeat what I said at Second Reading about the wholly predominant role of the big six, all of which operate in one way or another with a vertically integrated operation that goes all the way from generation to supplying the final consumers. Other amendments on the Marshalled List seek to break into that and I shall be interested to hear what the noble Lord, Lord Berkeley, is proposing. He is not in his seat at the moment but he will be back, I am sure. There are other amendments as well, which we will come to later on.
As I have said, Clause 5(2) makes no reference to this matter. It would add a great deal more weight to the obligation on DECC to take into account the needs of independent generators and new entrants if we added a new provision that makes explicit the objective of promoting competition. The capacity mechanism is one of the ways in which the authorities intend to intervene in the market. Indeed, having seen to what extent this is under the control of the Secretary of State—certainly in the initial years—one might say that it is more than intervening; it is, in fact, running it. However, this is one of the ways in which the authorities are intervening, and the amendment has been deliberately phrased in general terms to mirror the requirement under the Electricity Act 1989 that I read out at the beginning.
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I believe that this amendment will help the Government to achieve their stated desire of having greater market competition. Indeed, when some members of the industry involved met my right honourable friend Michael Fallon, he said that the Bill should be used to send positive signals to investors—in particular, independent producers and new entrants. This is the first opportunity that we have really had to introduce into the Bill what the Government clearly have as one of their central purposes: to increase competition using this new electricity market reform. That is the purpose of Amendment 52.
The other two amendments in this group that are in my name and that of the noble Lord, Lord Roper, are Amendments 54 and 55. It is not just Ofgem that should have this duty; the Secretary of State must have it as well. It is the Secretary of State, not Ofgem, who is designing the capacity market. I confess that I have not had time to read the entire consultation document, which was issued yesterday. I have been promised a hard copy but have not received it yet, although the Library very kindly printed one out for me. It does not have the annexes but it is a 60-page document. As noble Lords will realise, one has had other immediate things to think about, but I shall take it home and have a very good look at it. I hope that that duty on the Secretary of State will be in it. There needs to be a duty on the Secretary of State as well as on Ofgem.
I end by reminding noble Lords of the statement of my right honourable friend Michael Fallon, which I quoted at the end of my Second Reading speech, as reported at cols. 206 and 207 of Hansard on 18 June. Michael Fallon noted that he,
“expects a number of amendments to be tabled to the Energy Bill during its passage through the Lords, and did not have any objection in principle to the recommendation for a clause stating that one of the objectives of the capacity market should be to encourage competition”.
I beg to move.