My Lords, Part 2, which is really the heart of the Energy Bill, contains all the proposals for the reform of the electricity market. Chapter 3 of Part 2, in respect of which I am moving this amendment, deals with a very important part of the reform, the introduction of the capacity market. As the noble Baroness has just mentioned, that is of course designed to try to attract investment which the market might otherwise find it difficult to support. It is one of the measures that the Government are introducing, if I may put it crudely, to keep the lights on—to make sure we have enough generating capacity to keep the power flowing. At this stage of the Bill, I do not think it is necessary for me to start spelling out all the details of this, which have been very substantially debated at Second Reading, in Committee and on Report.
However, I think it right once again to draw the attention of the House to the fact that most of the detail of this is to be in regulations. We are hoping that
the Bill will be Law before the end of the year—indeed, I hope well before the end of the year—and that the regulations will follow next year, and we are waiting for those. I have to say to my noble friend that the Government have been extremely good at producing drafts of what all the really important regulations would contain. It is a substantial document and I do not propose to read it out, but there is an enormous amount of detail in it and it is helpful for those who have to operate the new system to have that detail now.
4.15 pm
In addition to the regulations, there will also have to be what are called capacity market rules. They will either be made by Ministers, or can be made by the regulator, Ofgem. Again, in that document we have been given draft rules and I will come to them in a moment. Both the rules and the regulations are currently the subject of consultations and, while this is clearly essential to get them right and to make sure that they avoid unintended consequences, it means that even at this late stage of the Bill, it is not really open to us to debate the details. What we can ensure is that the Bill provides the necessary rules and guidance to what we think the Government ought to be aiming at in making these regulations, and that the processes by which they are made are sound and fit for purpose.
That is really what this amendment is about. It is Clause 34 that confers on the Secretary of State the power to make the capacity market rules. As I said, it is Clause 34(3) which gives the power to the “Authority”. That is the phrase used in the Bill, but that means giving the regulator, Ofgem, the power to make capacity market rules subject to conditions. These conditions may be about consultations, and in particular, they must provide that if it is Ofgem which is to make the capacity market rules, it must consult and then set out two categories of what one might call the participants in the scheme—either anyone who has a licence to supply electricity or anyone who is already a capacity provider.
It is my view that this leaves out an important group. Ministers have recognised that in order to promote competition—there will be a great deal more about competition on the next amendment that I will move—it is important that new entrants and independent generators should be enabled, or indeed encouraged, to apply for a contract under the capacity market arrangements. They may very well not already be licence holders, and by definition they are almost certainly not yet capacity providers. My amendment provides that, in addition to those two categories in the Bill, there should also be included anyone,
“who has notified the Secretary of State of his intention to become”,
a capacity provider.
How important is this? I have already demonstrated that in this volume the draft rules cover no fewer than 119 pages. They are immensely complicated; the definitions alone cover 20 pages, which gives a measure of the complexity of all this. They cover such vital issues as the timetable for the capacity auctions, how those wishing to bid could gain the necessary prequalification, how to decide who is eligible to bid, how the auctions will be conducted and so on. This is all highly relevant to anyone who is going to take part in these auctions,
especially new entrants and independent generators that are aiming to participate in the market. Surely it is as important for these companies to know about the rules and any proposed changes to them as it is for firms already operating in the industry. It is a very simple question and I think that the answer can only be: yes, they must know about them. I hope my noble friend will give us satisfaction. I beg to move.