We tabled Amendment 55ALF in order to consider in detail the provisions in Chapter 5 about conflicts of interest and contingency arrangements in relation to the creation of the counterparty and the role that National Grid will be given in the delivery of many of the features of the electricity market reform proposals.
The amendment would slightly change the current wording of the clause that allows for the Secretary of State to determine the kind of appropriate measures needed to ensure that there is no conflict of interest between National Grid’s commercial enterprises and the role that it has been given under the EMR. I am sure that our amendment is not perfectly worded—it is a probing amendment intended to clarify that this should not be a question of discretion. The current wording makes it clear that the Secretary of State has a certain degree of discretion in deciding whether it would be “necessary or desirable”. That seems slightly too broad. We have tried to encapsulate in our amendment the idea that sufficiency is the important aspect, not desirability, and that there should be absolutely no question but that action will be taken to eliminate conflicts of interest between National Grid’s commercial enterprises and activities and its EMR role.
Along with, I am sure, many other noble Lords, we received a briefing from National Grid on this issue. We obviously recognise and take note of the many measures that National Grid has already put in place to manage conflicts of interest in other parts of its business and its very strong undertaking to continue to operate in a way that has no conflicts of interest. We do not mean to question National Grid’s desires or motives and are sure that it does indeed seek to work in such a way that it has no conflicts of interest—our concern is with the legal basis for the interventions that the Secretary of State will undertake to ensure that.
It is worth considering that the Utilities Act 2000 and the Electricity Act 1989 built in certain provisions that prohibit National Grid from undertaking certain activities. For example, it is not allowed to disclose to a third party any information about individuals or businesses that it receives by virtue of their transmission licence activities. That seems to be the kind of quite tightly drawn provision that might need to be updated in the context of the EMR. Clearly, National Grid will receive information from third parties in relation to the functions that it will carry out under the EMR. It is the body that will be tasked by the Government with signing the investment contracts and the CFDs, which will give it
access to information that it would not otherwise receive. I just question whether the provision created under the Utilities Act needs updating to ensure that it applies to not just the transition licence but the new role in the EMR.
It is an example of why we need to get this right and make sure that we have thought of every angle. We should not create a framework in which the Secretary of State can determine whether something is necessary or desirable. It is the word “desirable” that gives us slight cause for concern. We think the actual criteria should be that it is “sufficient” and would like to see explicit mention that there should be no conflict of interest between the system operators’ roles and the new roles they are being given under the EMR. I beg to move.