Electricity and Gas (Internal Markets) Regulations 2011

My Lords, I apologise to the Committee for not getting here at the start of these proceedings. It is a terrible thing to say, but I went to the wrong room and got lost. My interest in this issue stems from talking to many ports and airports around the country. I recall having correspondence with Ministers a few years ago on one issue in particular. Ports and airports which already had a network might have tendered out the supply of electricity to get the best deal for their various tenants, but if one tenant decided to go to another supplier then, in order to comply with the directive and the Citiworks judgment, the port could not stop them. This may be fair enough but the port might then be saddled with the very high cost of upgrading its internal electricity network to grid standards. I know that Ministers at the time—I think it was before the election—understood the problem, but it has not gone away. It seems that there is something of a rush about getting this through, which I cannot believe is happening in any other member state. Can the noble Lord tell me whether any other member states are implementing these regulations at the same speed as we are? The costs of doing this, whether capital cost or anything else, and the pricing methodology for assessing the charges, worry me and this needs further discussion. It is good that, at the seminar on 9 May, Ofgem announced a helpful concession to allow a higher capital cost figure to be taken into account in assessing the charges. However, these additional costs cannot be taken into account in the case of the input of the opt-out on existing bulk purchase contracts, where the local network provider has committed to a minimum threshold. This seems rather unfair. If a port has put in a network and negotiated a bulk electricity deal, then half its tenants decide to go somewhere else—which they can do—it is left holding the baby with quite a big loss. One port told me that if all this went ahead and it was forced to implement it, it could lose in the region of £10 million a year. That seems a very high figure. There is clearly no way to stop this and it is probably right that tenants should be able to choose to buy power where they want. However, the cost of such a change should be borne by the tenant who wants to make the change, rather than by the landlord losing out. Ports and the port businesses are also being hit by the carbon reduction commitment, which, as we know, is a tax on energy used by businesses. CRC is currently payable in respect of all business electricity users on port estates, even when they are below the minimum usage threshold for paying it. This may encourage more tenants to opt for third-party suppliers, which also puts more pressure on the port. Could the Minister see whether these effects can be mitigated, either through further discussion with Ofgem or further meetings with airports and port operators, to try to redress some of the adverse effects that are perceived at the moment?