Unrevised

Members present

Baroness Scott of Needham Market (Chairman)

Lord Boswell of Aynho

Lord Cunningham of Felling

Lord Curry of Kirkharle

Viscount Hanworth

Lord Krebs

Lord Rooker

Lord Selkirk of Douglas

Lord Trees

Viscount Ullswater

Baroness Wilcox

________________

Examination of Witnesses

Andrea Leadsom MP, Minister of State, DECC, and Tim Abraham, Head of European Policy, DECC

Q1 The Chairman: Good morning. Minister, you are very welcome. This is your first time in front of this Committee, so we are very pleased to see you and, of course, Tim Abraham, who is very used to visiting the Committee. We are very much looking forward to hearing from you today. As you know, we are carrying out a short piece of work, but one that we think is very important, on the governance aspects of energy union. We know that your observations and thoughts will be really useful to us in forming our thinking. This is a formal evidence-taking session of the Committee. A full note will be taken and put on the public record in printed form and on the website. We will send you a copy of the transcript, which you can revise in case there are any minor errors, although there never are. This session is on the record. It is being webcast live and is accessible via the parliamentary website. You have received a copy of the interests declared by all members. I remind members that if they have any relevant interests, they should declare them the first time that they speak in today’s session. That would be very helpful. I am particularly pleased to have with us the Chairman of the EU Committee, Lord Boswell, who I know is an old friend of yours, on the hereditary principle.

Andrea Leadsom: Not quite. I think it is on the democratic principle.

Lord Boswell of Aynho: I should declare my interest, Chairman. Andrea Leadsom succeeded me as an MP.

The Chairman: It is very good to have continuity. The usual form in these things is to start off with some general points and then to come down to the specifics. Could I start by asking you to outline for us the UK Government’s position overall on the direction that the energy union proposals are taking and, particularly, how you see the balance between member states’ autonomy to determine their own energy mix, on the one hand, and the objectives of the energy union and closer working?

Andrea Leadsom: Thank you very much for having me. I am delighted to be here. This is an incredibly valuable hearing and I am looking forward to reading the results of it.

I would like to start by saying that the Government are very supportive of the development of the energy union. Effectively implemented, it should deliver the competitive, interconnected and fully functioning single energy market that should provide good value for money for consumers in the UK and across the EU. I can assure the Committee that, as we move towards the UK presidency, we will be active in pushing it forward. But—there is always a “but”—the energy union must not be a straitjacket for member states. We are very clear that it must respect member states’ rights to determine their own energy mix and not constrain those policy choices that are best done at the national level, reflecting national circumstances and priorities.

Your current inquiry is extremely timely. After securing a good result on the 2030 framework at the European Council a year ago, minds in Brussels have now turned to considering how best to meet those 2030 objectives, as you know, and how to implement the energy union more generally. In answer to your request for general comments, we are supportive of the energy union but determined that it should not become a straitjacket for member states, which very clearly need to look at their own particular circumstances in determining their own energy mix and the delivery methods for it.

The Chairman: Thank you for the introduction. We will unpack some of that, in terms of how it is possible to create a governance framework that bridges the potential gaps between those two. I would like to start with Lord Cunningham.

Q2 Lord Cunningham of Felling: Minister, surely one of the fundamentals of energy security, which is what I will question you about, is that those countries that are most energy secure are those countries that are self-sufficient in energy. I wonder whether you think that the European framework will result in Britain importing more or less energy than it does now.

Andrea Leadsom: We are very supportive of the EU concept of voluntary regional co-operation. My sense, as someone who is new to energy since May, is that this is an extraordinarily complicated area. Energy policy has so many inputs. If you pull here, something moves there, so it is very important that you share best practice and ideas. There is no monopoly of good ideas. Regional co-operation on a voluntary basis can help all EU member states. Very specifically, regional co-operation at the power generation level can help all EU member states—for example, through interconnection, ensuring that power flows both ways, and through imported LNG. All of the co-operations that can be very well done at EU member state level on a voluntary basis can help to improve energy security. However, I come back to my original point, which is that it must not be prescriptive. We do not want a recipe that suits the EU from an energy security point of view, nor do we want the UK to be responsible for the bottom-line energy security of other member states, so it needs to be co-operative and voluntary. There is an enormous amount going for that sort of co-operation, sharing of best ideas and working together to improve overall energy security.

Lord Cunningham of Felling: I do not disagree with any of that. My question was: will this result in our importing more energy than we do now or less?

Andrea Leadsom: I am sorry; I apologise; I took your question to be rather more general. It certainly could do. It is very difficult to predict. As all member states have moved towards looking more closely at renewables, for example, we have issues of intermittency, which means literally that, if the wind is blowing or the sun is shining in one part of the European Union, it may be possible over time to benefit from that and, at the same time, for interconnection to provide us with more imported power at a time when we need it and, likewise, to export when we do not. It could lead to greater imports. It will lead to greater interconnectedness. It is very difficult to be absolutely clear about the net impact.

Lord Cunningham of Felling: Thank you for that. Since energy security is a key issue in all of this, will the proposal for the new EU energy supply approach make the UK more or less vulnerable in terms of energy security?

Andrea Leadsom: In the UK, as you know, we have introduced the capacity market, as have a number of EU member states, deliberately to address the fact that, with the increase of intermittent renewables producing power for the network in our different countries, we want to be assured of power supplies. The capacity market will provide that security of energy supply that we want to see. However, there is no doubt that more interconnectedness requires that you very carefully derate your expectations for imported energy so that you do not threaten your own energy security. Is there anything you want to add to that, Tim?

Tim Abraham: If the single market works properly, price signals will determine where energy flows. Therefore, on the whole, it should be better for all member states to join into one single market. That is why we are encouraging greater interconnection and so forth. To answer your first question, yes, it will very much depend on how the market works. However, if you believe in the single market, that is one of the aspects that we feel is better for the UK.

Q3 Lord Rooker: Good morning. I have an interest to declare, as a pro bono director of the Ludlow Hydro Co-op. We are fitting an Archimedes screw into the River Teme at Ludlow and will start generating energy early next year. It is 40% funded by the Chancellor of the Exchequer, I understand, so that does help. As far as the Government are concerned, do you have any red lines laid up in respect of energy security, beyond which you will not go?

Andrea Leadsom: Absolutely. The be-all and end-all purpose of DECC—the Department of Energy and Climate Change—is to keep the lights on, while decarbonising at the lowest cost to consumers. Ultimately, keeping the lights on is our complete focus, day in, day out. Keeping the lights on is non-negotiable. Energy security is absolutely our top priority. As I said, we have introduced the capacity market to ensure that, with the absolutely welcome increase in renewables, we do not at the same time, because of the fact that they are intermittent, end up compromising energy security. In direct answer to your question, energy security is everything. The red lines are around keeping the lights on and keeping enough of a buffer to make sure that we are never compromising energy security.

Lord Rooker: The red line is not keeping the lights on—the red line is how the buffer is made up. There must be mixes of energy—or loss of various capacities—beyond which you will say, “We are not letting that go”, in order to guarantee that the lights stay on.

Andrea Leadsom: I see what you mean. What you mean is—

Lord Rooker: The red line in generating the power to make sure that the lights stay on. Are there any areas where you say, “Beyond this we are not going”?

Andrea Leadsom: Not in the sense of by power plant or by technology, if that is what you mean. We would not say, “We absolutely must have 20% of coal-fired power generation. That is our red line”, or, “We must have x% of gas-fired power”, or, indeed, x% of interconnection. We do not look on it like that. The capacity market ensures that supply. As you may know, we have recently agreed that interconnectors can bid into the capacity market. We are the first EU member to achieve that approval. What we are looking at is the overall mix. We look very carefully at the likelihood of outages, of reverse flows in the case of interconnection, and of intermittency in the case of renewables, to ensure that we have the right balance. We do not say, “It has to be a minimum of this from renewables and that from coal”.

Lord Rooker: To follow up on what Lord Cunningham asked, does having an integrated market and an energy framework make the EU, rather than the UK, stronger or more vulnerable?

Andrea Leadsom: Definitely stronger. A single energy market provides us all with a greater number of options. Fundamentally, it provides some EU member states with energy security that they did not previously have. Those who were overexposed to Russian gas imports, for example, have found that the integration of EU energy markets—the ability to receive power through interconnection, overhead or underground, from other member states—has literally been an enormous increase in energy security for them. In the UK we are starting to benefit from greater interconnection. We certainly see that that improves our options for energy security. As I said, we will never compromise. For us, energy security is absolutely the first and last line.

Viscount Hanworth: You propose that the capacity market and interconnections are both ways of achieving energy security. It has also been said that we are encouraging greater interconnection. How are we encouraging greater interconnection, because I do not see very much happening in this respect?

Andrea Leadsom: We are determined to see competition and private sector investment in energy supply. Wherever possible, we are trying to introduce greater competition and to provide price signals. As you will know, we have the cap-and-floor arrangement for interconnectors, which has brought forward new projects. We are working very closely to encourage further new projects to come forward, the idea being that, rather than the Government or, indeed, the bill payer paying for interconnection, the private sector delivers it with some certainty of a cap and a floor price that it can achieve. Outside those parameters the consumer wins or loses, but within those parameters there is some risk-taking by the private sector. That certainly has brought forward new supply. We believe that it will continue to do so.

Viscount Hanworth: If we are talking about connecting the UK to the rest of Europe, we are talking about a massive engineering project. Might there not be some doubt that the market will be forthcoming, unless it was heavily encouraged by Government sponsorship?

Andrea Leadsom: As I said, we are the first EU member state to allow interconnectors to bid into the capacity market, so that is a very attractive option for interconnector projects. At the same time, we work very closely with them. What we do not want to do is to end up where the Government have to sponsor and provide interconnection. We want to encourage, as far as we can—and we are doing that all the time—the private sector to come forward with these proposals.

Tim Abraham: It is not right to say that we do not have any interconnectors; there are a number in the pipeline. There is one with Belgium that has essentially just been completed. There is one with Norway that is now well on the way to an agreement. Denmark is another connector that is likely to happen. Iceland is being talked about a bit further down the line. There are a number of interconnectors.

Viscount Hanworth: You have mentioned nations, rather than private enterprises. If I can précis the Minister, will the hidden hand be able to provide what is necessary here?

Andrea Leadsom: We believe so. That is our expectation and our plan.

Viscount Hanworth: Okay.

The Chairman: I want to move us on to the question of regulation, which was one of the key issues when we carried out our inquiry into regional co-operation in general around the North Sea. When we looked at energy, the regulation was held up as a real barrier to a more integrated approach to North Sea energy. Lord Curry wants to ask about regulation.

Q4 Lord Curry of Kirkharle: Good morning, Minister. Let me declare an interest. I chair the Better Regulation Executive, which is about reducing the cost burden of regulation on business, so I have an interest in this area. The logic of having a secure source of energy within the European Union is clear, understandable and supportable. A logical extension of that principle is to look at how this is going to be governed and the role of the regulators within it. To establish a pan-European regulator is a logical thought process. However, that raises the issue of the role of the regulators within each individual member state. They will all differ and have different terms of reference and legislative responsibilities. Since the Commission has suggested that the role of ACER, the European regulator, be enhanced, does that mean that Ofgem will be subservient to the European regulator? What impact will that have on its statutory powers? Will it have to surrender some of those powers to a European regulator that will oversee the whole market? This is a huge issue in terms of how we deliver energy across the European Union under a single regulatory regime.

Andrea Leadsom: I welcome the fact that you chair the Better Regulation Executive. That is wonderful. Philosophically, I am completely with you. We want to see deregulation, not more regulation, to facilitate better co-operation. In the North Sea, as you will be aware, we have done a huge amount to try to improve and consolidate the regulation there. We are open to considering an enhancement of ACER’s role. The key thing is that we do not want to see any attempt to undermine the role of national regulators—we would completely resist it. It is essential that any increase in the role of ACER should remain subject to the approval of its board, which consists of all 28 member states, to ensure that it does not have a scope creep. We do not want to end up with duplication of regulation, in which you end up trying to meet the demands of two different regulators, one national and one European. At the same time, we want there to be a deregulatory, facilitative process.

An example of where it might be more efficient for ACER to take decisions is EU network codes, where at the moment decisions have to be taken by all national regulators. It might be charged with overseeing the functions of the European system operator bodies, ENTSO-E and ENTSOG, which play a key role in the development of the internal energy market but are not regulated at EU level. For example, as we move further towards an integrated EU energy market where there is more interconnection, it may well make sense, just for speed and ease of implementation, to have some of the cross-border issues dealt with by the EU regulator, but not to undermine or duplicate the role of national regulators. That is where we feel the balance should be.

Lord Curry of Kirkharle: The balance of getting that right will be hugely important. The evidence to date of creating harmonised regulatory regimes—I am not sure whether that is the plan here—is that they always rise within Europe to the highest level. We do not reduce the burden; we tend to increase it. There is the risk of significant additional bureaucracy being attached to this and adding significant additional burden to our own energy generators. Watching that space will be critically important.

Andrea Leadsom: I completely agree with you there. As I said at the start, I am a big fan of deregulation. In a sense, this is slightly back to front, but any enhancement of ACER’s role needs to be to reduce the amount of regulation that is going around the 28 member states, as opposed to increasing or duplicating it. I see ACER’s job as being to facilitate ease of regulation, communication and so on, as opposed to adding to it. I completely share your concern and suspicion that any new regulatory thing at EU level tends to increase rather than reduce the burden of bureaucracy. We would be aware of that and keen to ensure that we did not inadvertently allow additional regulatory burden.

Lord Boswell of Aynho: I have enjoyed very much the presentation that I have heard so far. Can I pursue the thought that Lord Curry has started in relation to the Better Regulation Task Force? As you know, First Vice-President Timmermans, who is a big hitter within the Commission, is charged with the business of simplifying that. Is it not very important for you and your officials to make sure that you are keeping closely in touch with that side of it, as well as with the energy directorate itself?

Andrea Leadsom: Yes. Good morning, my Lord. That is an extremely good point to make. I can assure the Committee that my department is closely in touch with Mr Timmermans. We have been in contact on a number of issues where we are concerned about encroaching regulation, not necessarily directly from the regulator but with regard to certain things—a proposed hydrocarbons BREF, for example. We are very alert to the need for improved and easier regulation—not an increased burden. I completely assure the Committee that we will be very alert to any risk of that happening here.

The Chairman: That is very helpful. I move us on now to capacity mechanisms, to which you have already referred.

Q5 Lord Selkirk of Douglas: Will the Minister accept that, although capacity mechanisms are designed to ensure security of supply, inevitably they will have a role to play in EU energy policy? Following from that, will the development of governance be in potential conflict with capacity mechanisms or not? Can governance and capacity mechanisms exist in harmony and act in co-operation?

Andrea Leadsom: That is a very key question for the whole EU. I agree with you that over time, particularly as renewables play a bigger part in pan-European energy and power generation, capacity mechanisms are likely to become a more obvious necessity for all EU member states. Of course, in the UK we are to a certain extent ahead of the game, because we have had one round of our capacity auctions. As I mentioned earlier, we have also agreed that interconnectors can bid into the capacity auctions. We are actually doing rather well. We had some very high hurdles to meet to get through all of the EU state aid processes and agreements, which we have managed to achieve. While we recognise that some EU member states are already setting up their own capacity mechanisms and others will need to do so in the fullness of time, we think that there is not a one-size-fits-all approach. Each member state should be allowed and encouraged to come up with its own methodology, but each should be subject to the same high burdens of evidence that the UK’s capacity mechanism is subjected to, from a principles point of view.

Lord Selkirk of Douglas: Can I follow up with a question that, to a large extent, you have already answered? Should foreign energy suppliers be allowed to enter the UK capacity mechanism arrangements?

Andrea Leadsom: We think in principle yes. We are already allowing interconnection in. I know that other EU member states would like to do the same. I do not see any ideological or, indeed, energy security reason why we should not continue to allow foreign energy providers into our capacity auction. For example, as you will be very much aware, in the gas market we import 40% of our gas needs. Obviously we take careful note of where we are importing it from, but nevertheless we do not have the philosophical view that any energy not produced at home is bad or insecure energy. It is a balance in all things. What we need to look at is the right balance of different sources and how reliable they will be. In terms of the capacity mechanism, that gives us the certainty that we need. In answer to your question, yes, we think that foreign energy providers can take part in that.

The Chairman: That is very helpful. Thank you.

Q6 Lord Krebs: I should declare an interest, as a member of the Committee on Climate Change and the chair of the Adaptation Sub-Committee of the CCC. I would like to pick up the theme, Minister, of renewable energy targets, but to place that within the broader target of the EU to reduce greenhouse gas emissions by at least 40% by 2030 compared with 1990 levels. Within that, at least 27% of the mix should be from renewables. I wondered how you see that fitting into the UK’s national targets. The Committee on Climate Change sets its path in the form of advice to you on the carbon budgets. We are about to produce advice on the fifth carbon budget. I wondered whether you see a conflict between what the EU is setting and what you are setting nationally, both for the overall target of 40% and for the particular mix of 27% renewables.

Andrea Leadsom: We are committed to meeting our legally binding emissions reduction targets. Those are the ones that are enshrined in UK law. Of course, the difficulty with the EU 27% reduction target is that it is set at EU level. We would strongly resist any attempt effectively to allocate that out among 28 member states. My answer is that we are looking at the legally binding targets. We believe that in meeting our legally binding targets we will make our fair contribution to the 27% EU target, but we do not want that 27% target to be divvied up and to become a hard target for individual member states. Does that answer your question?

Lord Krebs: I think that it does. Could I follow up with a couple of supplementaries? How do you think that the governance mechanism that the EU proposes will assist in developing progress towards the targets?

Andrea Leadsom: The major theme of the governance process is to encourage voluntary regional co-operation. Together with the increasing cross-border energy flows as part of the single market, that should help member states to work together to develop cost-effective ways of meeting both national and EU targets. The ETS and trading will remain a cornerstone for limiting emissions in the power and large industrial sectors. All of that will be underpinned by the use of indicators. As I understand it, the Commission will produce some indicators for all member states to inform and report back to it on how they as individual member states are doing. I think that we are in a good position. We are confident that we are on the right path and remain completely committed to it.

Lord Krebs: In relation to enforcement, we will have this report of indicators, but what mechanism will be in place to ensure that the target is met?

Andrea Leadsom: The Commission will report back on a traffic-light system and will deal with individual member states to feed back to them how well the Commission feels they are doing towards this EU-level 27%, but it will be for individual member states to determine how they reach that. As I said, we would resist anything more prescriptive around what the member states should be doing to achieve that goal.

Lord Krebs: I will ask one final question, which is about the policy environment. We have heard in the press concerns about the lack of policy certainty affecting investment in renewables. I wondered what your views about that are. As we move through into the 2020s, when many of the current policies begin to run out, do you envisage your department having a clear direction of the policy through the 2020s to ensure continued investment in renewables?

Andrea Leadsom: Yes. The department and I are determined to provide investable certainty to businesses. You are exactly right. There has been a lot of publicity about the need to protect consumer and business bills by calling a halt to some of the policies that were at risk of overdeploying—and, indeed, in some areas have already significantly overdeployed—against what was expected. In a sense, you could say that some of the renewable energy subsidies have been victims of their own success. They have significantly overdeployed. We have either met or exceeded already certain targets that we had for 2020. As a result, we have significantly overspent, potentially, against the budget, which is picked up by all of us as energy consumers and by the businesses that are also big consumers of energy in the UK. We had to take steps to protect bill payers. That has resulted, in a lot of cross businesses and investors, completely understandably. We are trying to get to a new policy that gives a clear view of the future, so that businesses can have some certainty. That will include announcements on the LCF beyond 2020 and on the future for the CfD.

The Chairman: Before we move on from this, the Government have signed up to an overall package that sets this renewables target at EU level. You have just explained that the Government hold to themselves the right to set their own mix. I wonder what sort of moral obligation, almost, you feel if the Commission reports that the UK is way under 27. Do you think that it is acceptable that we should be under and expect other states to pick up the slack that we have not made? What is the prevailing feeling in the Government on that?

Andrea Leadsom: The answer is that we all started from different positions. Some EU member states started from a position where they were already generating 50% of their energy from hydroelectricity or other renewable technologies, so they started with a huge advantage. We started from well behind the curve and are doing incredibly well in rapidly expanding. I was speaking yesterday about the fact that in the last Parliament our renewables generation trebled, which is fantastic news at any level. We will take seriously, as we always do, any targets, but that is exactly why we do not want this 27% to be somehow divvied up among member states, either in terms of the type of generation or of the absolute target for any member state. We believe that our legally binding targets will give us sufficient impetus to deliver or, indeed, exceed our fair share. Then you are going to ask me, “What is our fair share?”. We do not really want to get into that. We are committed to meeting our own legally binding commitments. That is what we want to focus on.

The Chairman: Thank you. You have saved me asking.

Lord Trees: I would like to follow up on that. Good morning, Minister. There is a target of 27% for renewables and a target of 40% for emissions. Unfortunately, some renewables produce emissions. How will the governance mechanisms resolve that sort of conflict? How will they manage the balance—that we do not push too far with renewables and make the emissions situation worse?

Andrea Leadsom: Going back to this 27%, we are very clearly focused on our legally binding commitments for emissions reduction. Very importantly with the 27%, we do not necessarily want to see this as all about power generation from renewables. What we are seeking to do in the world is to reduce carbon emissions, which, as we know, can be done by moving from unabated coal to gas and by moving to nuclear, for example, not just by generating power from renewables. There is also a big win to be had from better insulation, more fuel efficiency and focusing on the demand side. We do not believe that a hard-and-fast focus on what you are generating and from which particular technologies is helpful. Individual member states should be focused on their own emissions reductions and should be given the flexibility to decide how they do that.

Q7 Viscount Ullswater: Minister, good morning. I want to ask about national energy and climate plans. If it is part of EU governance that the production of those plans should be undertaken and if they are to be the basis for a strengthened governance, who in your opinion should be responsible for the assessment, review and enforcement of the plans? Would you consider an independent European energy and climate observatory, somewhat similar to the Committee on Climate Change in the UK, or do you think that it ought to be left to the Commission?

Andrea Leadsom: You are referring to a proposal from, I believe, a European think tank for an independent European energy and climate observatory, as an additional body. I would always question additional bodies. To the earlier point about regulation, that is another budget that has to be divvied up. Someone has to pay for it, it is a lot more staff, they come up with their own rules, then the Commission comes up with its rules, there is potentially a clash and someone has to resolve those issues. I always think that, ideally, we do better to work with what we have. The core theme running through my evidence is that member states should be given every bit of leeway to determine their own energy mix and their own way of meeting their legally binding targets. That should not be either second-guessed or presided over by some kind of supra-EU authority telling them what to do. Principles-based looking at, feeding back and urging on are absolutely fine. The Commission already does a good job of that. I would need to be persuaded of the advantages—and it would be a big persuasion—to suggest that there should be another body with some kind of governance role.

Viscount Ullswater: Although you said that you did not want the EU to be prescriptive, when it can see that national plans are not consistent with one another, should it have a role for comment on that?

Andrea Leadsom: Absolutely—for comment. I certainly think so. For example, at the moment we are subject to a state aid challenge on Hinkley C from one of our EU member state friends. There are many people who feel that that is more a challenge to our choice of energy mix than it is a challenge to the EU state aid proposals. I feel that it is very important that individual member states continue to have the ability to decide their own energy mix. Comment is fine, but having some sort of governance role that tells you, “You cannot do that. You have to do it this way”, is not helpful in meeting the goal that we are all seeking, which is a reduction in carbon emissions.

The Chairman: The sense that I got from our seminar last week was that the thinking behind the role of the observatory was simply to ensure that there is consistency between the national plans of every member state. At the risk of opening old wounds, it was exactly because member states made their own assessments of their economic situation in the run-up to the creation of the single currency that we ended up where we did with Greece. I do not mean to overdramatise it, but there was that sense of how you make sure that the national plans are all being created and assessed in exactly the same way.

Andrea Leadsom: In answer to that, Madam Chairman, I would simply say that comment is great and assessment is great, but enforcement is a wholly different matter. It is entirely appropriate to have independent scrutiny. As we know, there are some very good European think tanks that will provide that level of scrutiny themselves. It is a different ball game when you come down to saying, “Because you have not done this, which they have, you must now change your policy”. That is a very different issue. It gets into the area I have dealt with of more regulation and more burdens on member states, which are not necessarily in the interests of that particular member state’s energy mix.

The Chairman: That is a very helpful distinction. Thank you. Lady Wilcox has the penultimate set of questions.

Q8 Baroness Wilcox: Good morning, both. Affordability is the key objective of the European energy policy, it says here. Would you agree with me that affordability is a key objective of the European energy policy, but reliability of supply—keeping the lights on—should in my book be equally important?

Andrea Leadsom: Yes. We always talk about our energy trilemma, which is keeping the bills down, keeping the lights on and decarbonising. Of all those, keeping the lights on is the one that we do day in, day out, every minute of every day, in an environment where we need to balance keeping the bills down and decarbonisation. In the big picture sense, of course, decarbonisation is a top goal, but keeping the bills down is incredibly important for consumers. As we have seen only recently with the steel industry, which has cited energy costs as one of the reasons for its problems, it is a very real consideration. Bills for consumers and businesses must always be a vital part of our consideration.

Baroness Wilcox: I will follow that with a question that I think is relevant for consumers. How will you involve consumers in any discussions that may take place when future principles of EU energy governance are being negotiated? As yet, we have not had any mention of the consumer being involved in anything. My background is that I ran the National Consumer Council for a while. It always seemed that, if the consumer or their representatives were brought in too late, they were not talking in the same language and already felt that it was not going to work. It seems to me very short-sighted not to have had a consumer voice somewhere along the line in with this. Could you give me a view on how you see the consumer input?

Andrea Leadsom: I completely agree with you. Consumer voices are absolutely vital. I am sorry to say that all too often people bandy it around that “It is only three quid on your bill” or “It is only five quid on your bill”. That might not sound very much, but for some people it is 10% of their weekly income. Consumer voices are vital. Tim may be able to add to this, but I would say that we always include consumer stakeholders in all of our consultations. For example, Which?, Citizens Advice and other consumer voices are always included. Tim, could you add to that?

Tim Abraham: Consumers will be quite a big focus of the work that the Commission is now doing on energy markets and its market reform. Indeed, Ministers will be discussing the consumer angle of market design at the next Energy Council. I think that you will find that consumers, the effect on consumers, the potential for smart ways of helping consumers and so on will be an important plank in the energy union.

Lord Boswell of Aynho: This is a follow-up to something that I have been mulling over in my mind in the previous exchanges. If one is talking about energy union, it has analogies, although not precise ones, with economic union and banking union, for example, on the financial side. A good deal of attention, including the fact that the United Kingdom is not a member of the fiscal compact but is consulted on matters, goes towards parliamentary governance of that. If it is only a matter of peer pressure and peer review—“How did you manage that? How is it that you are falling behind?”—there may be a case for some kind of parliamentary involvement as well. I do not want to create meetings for no purpose, but have you done any thinking on that as part of the process of making the whole energy union more accountable and user-friendly to member states?

Andrea Leadsom: The first thing I should say is that I miss our daily penpal experience. When I was City Minister, Lord Boswell and I wrote to each other, sometimes several times a day, on matters of European financial services, so I know what he means about the fiscal compact. In answer to that question, we have a very active energy and climate change scrutiny committee in the Commons. I know that you are also very active. In truth, we look to them to hold us to account, which they do very successfully. We have had some very feisty encounters already and look forward to many more. There certainly could be another parliamentary angle, certainly from the consumer point of view. That is something worth thinking about, but it is really the scrutiny committee—

Tim Abraham: Indeed. I do not know whether you were thinking national parliaments or the European Parliament.

Lord Boswell of Aynho: I was thinking international, for the record.

Tim Abraham: A lot of this is not a legislative proposal and therefore there is not a natural place for the European Parliament. However, it is up to them. They may well decide to come forward with own-initiative reports in this area. It would not surprise me if they did.

Q9 The Chairman: Very good. In the final set of questions, I want to turn to the Energy Council that is coming up in six weeks or so. It is fair to say that in recent years the activities of Mr Putin have really focused the minds of the Council on energy union and its potential benefits in terms of energy security. Could you tell us what your expectations are from the Council in December?

Andrea Leadsom: Yes. Whips permitting, I shall attend the Energy Council in a few weeks’ time. Our focus for that, which we hope will be accepted and adopted at the EU Council in December, is around the governance idea. We anticipate that the Energy Council will ask for the Commission to develop more detailed policies on governance, to be presented to member states at the Energy Council the following year. Those would include our key ask that governance should be around comment and assessment, but not straying into being prescriptive about member states’ mix of energy policies and so on. We have some draft conclusions, prepared by officials, which will be subject to ministerial scrutiny across EU member states. The next Energy Council in three weeks’ time, I think, will then inform the European Council. Obviously we hope that the European Council will take the recommendations from the Energy Council.

The Chairman: Are there any areas in which you can foresee that the only answer is a legislative approach, or do you think that a framework for governance could deal with all of the issues that have been raised?

Andrea Leadsom: My instinctive answer to that is that I would always prefer a framework. However, as I said in my opening remarks, I believe that voluntary regional co-operation, sharing of best practice and looking at ways to improve the single energy market are vital and that it is incumbent on different member states to look at those with their neighbours. A framework that encourages regional co-operation in ideas as well as implementation is a very good idea. Beyond that, I would always resist legislation, unless a very strong case was put for it.

The Chairman: In that mindset, who are the key allies? Which are the other member states that see the world in the same way as the UK Government? Are you prepared to say which countries want a stricter legislative approach?

Andrea Leadsom: It varies from country to country, depending on the particular area you are looking at. Some countries would like to see their energy mix preferences enforced more strictly across the whole EU. Others are rather resistant to making progress that might be deemed expensive towards meeting the energy goals of the EU. You have some wanting to press further and faster, others wanting to hold back, and others wanting to choose the energy mix and have it enforced across the whole EU. I would not like to pick out individuals, because we have different interests that we pursue with different member states. There are no bad guys or good guys. We work very closely with every member state on the interests that we have in common.

I would like to add one sentence to your question about legislation. In the UK, we believe that there is a role for legislation where it streamlines regulation. Potentially there are some better regulation proposals that would reduce the burden of regulation. We would welcome that, of course. I did not want to say that I am totally allergic to legislation. It is really the focus that we want to have on deregulating, reducing the burden and making more of the effort of business go towards generating energy at lowest cost, rather than meeting these hurdles that are put in its way. Any legislation that simplifies would be a good thing.

The Chairman: I was not suggesting that there are good guys and bad guys. What I was getting at was your optimism about the likelihood of getting enough support around this kind of approach to the governance of the union, as opposed to a more prescriptive one.

Andrea Leadsom: I would say that we are quite hopeful. We do not really see a theme of other member states being determined to have a prescriptive approach. Generally speaking, with the caveats that I have mentioned, there is a sense that nobody wants to see a legislative governance route.

Lord Curry of Kirkharle: I have a very quick comment, following up on Lord Boswell’s comment about Timmermans. We are very keen to go further—to encourage our regulators to look not just at how they can reduce regulatory burdens but at how they can contribute towards economic growth. We are introducing measures, with the Enterprise Bill that is currently going through the House, that will bring regulators into scope. I would not want that to be undermined by changes through this process. We need to build on the relationship with Timmermans and to encourage them to go further and endorse some of the policies we have been lobbying for very hard in Brussels.

Andrea Leadsom: Thank you. That is a really good point. It is something we will certainly take away and focus on.

The Chairman: Are there any other questions? We have just a few minutes.

Q10 Baroness Wilcox: I am delighted to hear you say the word “enforcement”. Having traded a lot in the European Union myself, I find it very difficult sometimes to work with another country where we are enforcing and they are not. It can be extremely difficult. I do not know how we are going to get round this, unless we convert them all to common law. Can you see any other way that we can get, for example, the fisheries quota to be the quota that it is supposed to be when we cannot report another country and can only look after our own? Is there any chance that we can get double enforcement, one country to another—choose your partner or something? I find it really difficult to get to grips with how we try to get some of the countries to understand that it is no good having laws if we do not enforce them.

Andrea Leadsom: Obviously that is much broader than energy policy. I know that a key part of the renegotiation prior to an EU referendum is focused on enforcement of the single market, in the interests of all member states. I think that the Commission and other EU member states are very much up for that, plus a new focus on competition and deregulation. We are moving in a good direction. The mood music is very positive.

The Chairman: I saw Lord Cunningham first. We will then see how we are doing, because we are running out of time.

Lord Cunningham of Felling: Chairman, it is a simple request. Can the department please provide us with a note explaining how dependent we are on energy imports at the present time and what your forecasts are for the future, broken down into the individual elements of coal, oil, gas and interconnectors, so that we can get a good information base on that before we come to any conclusions?

Andrea Leadsom: Yes. We will do that—delighted.

The Chairman: You are in luck, Viscount Hanworth.

Viscount Hanworth: I do not know whether this is a legitimate question, but is the Energy Council not highly fractious, as I have heard? If so, does that not justify the establishment of an independent observatory?

Andrea Leadsom: I am a huge fan of elected Members of Parliament, if that is not a contentious thing to say in this room, so I think that fractious can be good. It can be very healthy to have some lively debate. I certainly do not think that the fact there is lively debate means that you should have something that is conciliatory, where all agree, imposing things. I have not been to the Energy Council before; this will be my first visit to it. Perhaps I will report back afterwards.

The Chairman: We will look forward to that. We hope—it is certainly the intention—that the piece of work we are currently engaged in will be of assistance to you as you think about how this governance framework might operate and look.

Thank you very much, both of you—particularly you, Minister—for answering so fully but concisely. We appreciate it and look forward to seeing you again.

Andrea Leadsom: Thank you very much for having me.