My Lords, I hope that we can deal with this amendment a little more expeditiously, and that it will be more attractive to the Government.
I listened very carefully to the responses given by the noble Lord, Lord Gardiner, in our previous Committee session. I think he used the expression “We put consumers first” no fewer than five times on that occasion. That is a sentiment to which we can all subscribe and this
is precisely what this amendment attempts to do. Furthermore, it does not necessarily involve any expense, nor does it compel any Minister to do anything. In that sense, it is innocuous. It seeks to give Ministers the power to leverage the annual swings in gas price to consumer advantage; in other words, to facilitate the purchase of gas when prices are low in summer and to release when prices are high in winter.
I will give a little background. This is a new situation for DECC—and the country—because of two factors: first, the growth of the liquefied natural gas market internationally and its increase in importance means that today there is effectively a spot market, as there is in oil; and secondly, our increasing dependence on that spot market. I cannot remember the exact figures; I think it is around 40% that we need to buy of LNG, and that will progressively increase as the availability of North Sea gas declines. So there have been two changes.
As far as we are concerned, these have a good consequence and a bad consequence. The good consequence is that we shall probably never get really short of gas. We have two important gas terminals in the UK and should be able to import what we need. The down side is that we are exposed to the vacillation of global prices. For example, when Fukushima happened there was a massive spoke in global gas prices because people realised that Japan would require a great deal more gas. We would be exposed to other international pressures of that kind, as well as the seasonal variation of the surplus in the summer and the inadequacy of supply in winter.
I do not think that it is worth going into the economic detail of this at all today. However, one or more companies are interested in exploring this from a commercial point of view. I have discussed this with DECC officials, who were extremely helpful. It is clear that DECC, Ofgem and the national grid have been very concerned about supply availability. That has been their main concern, rather than the question of price, which has really come in in a big way recently. The first of two comments from DECC officials was, “We do not think that this will be commercial”. With respect, that is not their decision. If a business thinks that it might be commercial, that is what we should test. The other comment was, “We think we might be able to do this without an amendment anyway, with existing powers”, but I could not get a definitive decision on that.
The important thing is that we know from discussions with at least one company that, if there was something in the Bill which allowed the Secretary of State at his or her discretion to use the capacity mechanism or the contract-for-difference mechanism within the Bill to purchase gas under prescribed circumstances, that would be sufficient for the companies concerned to approach potential investors again with a better proposition, with a view to coming to the Minister to explore what might be arranged. It is not clear that this will be feasible, or that it will make sense to use this mechanism. It is simply a little bit of insurance.
Finally, it is worth pointing out that if the Government do not take this initiative, no one else will. Gas suppliers do not care. They simply pass on
any fluctuations in the international gas price to consumers. This is therefore something that the Government could do to smooth and lower prices for consumers. I beg to move.
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