UK energy bill back in the Lords, Ofgem must act sustainably

London (Platts)--16Jul2004

The UK energy bill returned to the House of Lords Thursday for the Lords to
give their assent to changes made to the bill in the House of Commons. Labour
spokesman Lord Whitty made a new amendment to the bill, which states that
energy regulator Ofgem must in future carry out its duties with a regard to
sustainable development, putting gas and electricity legislation explicitly in
line with water industry legislation. 

The government had argued earlier that Ofgem already had a duty to consider
environmental and social objectives and that such a statement was not needed,
but at this late stage changed its mind.

There was also a technical amendment to improve the administration of the
renewables buyout fund. Meanwhile, Lord Ezra of the Liberal Democrats tried to
introduce an amendment getting government to raise its household energy
efficiency commitments up to savings of 5-mil mt/year of carbon by 2010--the
2003 white paper target--from the current 4.2-mil mt/year target, but failed.

There was further debate about combined heat and power, although the Lords did
not attempt to get CHP exempted from the renewables obligation again, an idea
the Commons had opposed. Lord Whitty gave some further details of a new idea
being discussed to support CHP. He said the government is looking at a
"fixed-rate mortgage" type scheme for CHP. Government would guarantee CHP
plants a certain level of spark spread, a fixed difference between the price
it paid for its gas and the price it was paid for the electricity it
generated. When the profits were above the fixed rate, CHP plants would pay
into a "mortgage fund". When the spark spread was below the fixed rate, CHP
generators would have their income topped up from the mortgage fund. Whitty
said the idea was worth a study. "We are certainly willing to support further
consideration of it," he said. The Commons will have to agree to the latest
Lords amendments, but the bill could get royal assent by end of next week.

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