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Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): I must declare an interest, because I had a cheese salad for Christmas lunch. More seriously, during the meeting that my right hon. Friend has mentioned, various offers of compensation were made by the hierarchy of MANWEB. Would it not be better if it had made some commitment to further investment and the creation of more jobs?
MANWEB has halved the number of people working in the industry in north Wales, so it is no wonder that such problems are recurring.
Mr. Wigley: My hon. Friend has identified the nub of the problem and I shall come to his point about the need for investment. MANWEB boasts that in the urban area of Liverpool, which is in its territory, it has one of the best records for maintaining supplies in the United Kingdom. I am glad about that for the sake of the good people of Liverpool, but when we pressed MANWEB on why, we were told that most of the connecting lines had been routed underground as a result of a substantial investment programme undertaken in previous decades. We want similar investment in northern and mid-Wales to put more connections underground--where practical--and to upgrade lines and transformers elsewhere.
We noted with surprise that MANWEB has, in the recent past, not used all the funds available to it for improving the network. We understand that MANWEB has held back capital expenditure on the distribution network to the extent of £53 million of the amount that it will be permitted to spend between 1995 and 2000. I have received a letter from the electricity consumers' committee for Merseyside and north Wales in which the committee chairman, Mr. David Owen, states:
When we asked Mr. Berry what happens to the money, we were told that it is used to bring down charges for consumers generally. When he was pressed, he said that that was a commercial decision. It appears that, like other companies in the electricity sector, MANWEB is now profit driven. That is a problem which faces us when trying to get adequate investment.
I contend that the decision to use the £53 million in the other way was wrong. I believe that a commercial ethos has taken over from the concept of service and that we shall not have adequate investment to upgrade the network unless the electricity companies are severely penalised for not doing so. Similarly, there should be more planned maintenance of the network. As far as I can see, there is hardly any planned maintenance. Trees are pruned only once every five years and we are told that 50 per cent. of the losses in northern Wales were because of the interference of trees. A five-year cycle is simply far too long. There must be regular physical inspection of the lines, not just inspection from helicopters.
All this means having an adequate staff--and not all centralised, but out in areas such as north-west Wales. The MANWEB work force has been reduced from 4,400 in 1995 to 2,700 in 1997. There has also been centralisation, with the result that last month north Wales did not have enough technical staff who were familiar with the network, and workers had to be brought in from
England and Scotland. We are grateful that they came and for their help, but there were numerous stories of those people being lost, not knowing where they were supposed to go or not having details of the terrain. We must have a system to reverse the rundown of staff and an adequate number of depots.
To my amazement, I found that MANWEB plans to close local depots in north Wales. Apparently it plans to close the Pwllheli depot in my constituency and further staff reductions are planned--29 further persons will be lost to the electricity sector in north Wales this year. We asked the chairman for assurance that that would not happen and he refused to give it.
There should also be more staff to respond to customer telephone inquiries. Those people should be locally based and know the area; otherwise, the system breaks down and complaints made about the outages do not find their way back quickly and accurately to the field engineers who can put them right. There were numerous complaints about small transformers tripping out during the storms, but local staff were not told. When the information eventually got through, the fault could often be put right in 10 minutes--but people had had to wait for four or five days for that to happen. That is not acceptable.
I realise that MANWEB must operate within the confines of the regime set by the regulator. It said that, five years ago, the regulator refused to acknowledge the need for more money to improve the quality of supply. I understand that a formula used by the regulator still does not make adequate provision for the needs of quality improvements and that the regulator would not permit money to be used to put supply lines underground in rural areas. What is most disturbing is that I am told that the regulator wants to minimise investment by the electricity companies in general in order not to increase the net value of those companies in the marketplace.
Will the Minister arrange to meet the regulator? If those are the policies that emanate from Government guidelines to the regulator, will the Government please change the guidelines?
Were does all this lead us? It is clear that MANWEB could have invested more money in upgrading the network over time--unless it was blocked by the regulator. It could certainly spend more on employing more people locally. I believe that it decided not to do so because of commercial considerations--because it would reduce profits.
As MANWEB--and all the other electricity companies, for that matter--are driven by the profit motive, we have to use the only language they understand. They will improve the network and services only if they have to pay a substantial price, by way of penalty, for failing to do so. In other words, we need a compensation system that really hits the company if customers are not reconnected within a reasonable time. I suggest a rate of £10 for every hour beyond the first 24 hours.
Mr. Chris Ruane (Vale of Clwyd):
I have written to Charles Berry, the chief executive of MANWEB, and asked for automatic compensation. The company knows who has been cut off and for how long; customers should be automatically compensated.
Mr. Wigley:
I accept that entirely. The present compensation regime is inadequate. There is a loophole.
The whole formula needs to be re-examined. There needs to be a change in legislation to impose a statutory requirement to pay compensation and to remove the bad weather let-out. Only that will force the companies to give priority to maintaining supplies rather than profits. I understand that the electricity regulations of 1993 and 1995 are currently under review. I hope that the Minister will take into account the points that I have raised today. When will the review be concluded?
The questions for the Minister tonight are these: does he believe that a failure to re-establish supplies for four or five days is acceptable? Does he believe that there can be an adequate level of investment in upgrading the network under the present regulatory rules? If not, does he believe that that can be achieved within the current commercial framework of the industry or does that framework need changing? Will he undertake to discuss with the regulator the way in which the regulatory regime can be tightened? If necessary, will he amend legislation to provide a much stronger compensation regime to help customers? Will he set up an independent inquiry into what has happened?
The Minister for Science, Energy and Industry (Mr. John Battle):
I have only a few minutes to reply to the debate. I know that other hon. Members would have liked to participate, including the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) and my hon. Friends the Members for Clwyd, West (Mr. Thomas), for Delyn (Mr. Hanson) and for Vale of Clwyd (Mr. Ruane).
I am tempted to respond positively to the direct questions asked by the right hon. Member for Caernarfon (Mr. Wigley) at the end of his speech. The whole concern of our Government is to reinforce exactly those points: we are concerned that utility companies are putting profits and shareholders before service to their customers. Because we share those concerns, we have set in train a review of utility regulation. We feel that regulation is stacked in favour of the companies, and the current parameters of the regulator's role are to introduce competition, not to look after customers. We want to put consumers at the heart of regulation, which is the reason for the review. We want to redress the balance where it is wrong and go a long way to ensure that customers get a better service. I hope that the review will make its proposals in the coming weeks and, where we need to change the law, we will do it.
I am grateful to the right hon. Gentleman for raising the matter publicly with me and in the House, so that people are well aware that what went on in a small corner
of the world on a wild, stormy and bleak winter night cannot be passed over--it is a matter of importance throughout the length and breadth of this land. I know that some people were without electricity for several days, which must be a matter of deep and serious concern to us all. We have to establish whether the performance of MANWEB and the other public electricity suppliers affected by the severe weather could have been better and can be improved.
I am also grateful to the right hon. Gentleman for his words of tribute to the staff and engineers who went out to try, as best they could, to address the situation. We are looking at the structure of the operation, not the activities of those individuals and I am grateful for the way in which he couched his remarks.
I have already asked the Office of Electricity Regulation, Offer, which is responsible for the privatised electricity companies, to look into the events over Christmas and the new year not only to conduct a post-mortem, but to discover what action needs to be taken to ensure that we do not end up in a similar situation in the future. That includes considering what happened in the Norweb area, to which my hon. Friend the Member for Chorley (Mr. Hoyle) referred.
The regulator will look specifically at three issues. First, it will consider the steps that were taken by the public electricity suppliers to restore electricity supplies following the bad weather. Secondly, it will study their efforts to keep customers informed of when supplies were likely to be restored. Thirdly, and perhaps more generally, it will consider the ability of the distribution networks to withstand such weather conditions. That refers precisely to the question of investment. I hope that the regulator is not instructing people not to carry on investing. Investment in pipes, wires and the structure of the system is vital to ensuring that it improves.
I know that Offer has asked the companies to provide information about how quickly they were able to reconnect households and what resources were available to them to repair the damage to the network. The regulator has been asked to submit a report of those findings to my Department.
I am advised that the Meteorological Office had warned of winds of up to 35 mph, gusting to 55 mph. In the event, the winds were in excess of 100 mph between 6 pm and 11 pm, and the damage caused resulted in about 40,000 people losing their supply. That is no mean number. I know that hon. Members have had conversations with Mr. Charles Berry, the chief executive of MANWEB, about what happened that night, but some of the details bear retelling.
On Christmas day, the company had 500 people working out in the field. I should emphasise that it is the regulator's job to ensure that all licensed companies have the financial capacity to carry out their licensed activities. Offer will consider specifically whether MANWEB had sufficient resources to do its job. It would be interesting to know whether those 500 people were part of MANWEB's own back-up and whether those back-up arrangements were sufficient. Should it have more in-house staff who know the area, as has been suggested in the debate? I know that a number of engineers were pulled in from Scottish Power, Scottish Hydro-Electric and East Midlands Electricity. They are damn good engineers--pardon my language--but they may not have
known the area and failed to get to people as quickly as possible. We must ensure that the regulator considers that problem as well.
I understand that, as a result of the efforts of the back-up team, the number of customers without electricity on Christmas day dropped from 40,000 to 11,500. In the next two days, MANWEB got that number down to 3,000, and then to 400. By 28 December, the number was down to 76. It must have been awful for those 76 to be without electricity over Christmas. I saw the reports on television, and I have every respect for the stoicism that some people displayed during that difficult time.
As for the lack of investment, in the five years from 1990-91 to 1994-95, I am advised that MANWEB invested £292 million in the electricity network. In the five-year period from 1995-96 to 2000 there are plans to invest a further £339 million--a 16 per cent. increase. To put it as politely as possible, I am always a little bit sceptical about forecasts and actual spend. As part of the regulator's duty during the next distribution price control review, Offer will be examining how that actual spend compares with the forecast spend. That is the key figure. Companies will be asked to explain any variance between the two. That information must be taken into account when considering provision for capital expenditure in that review. The nature of the planned investment should be incorporated in the structure of the review.
Under the guaranteed standards of performance set by the regulator, customers are entitled to claim a payment if the electricity supply is not restored within 24 hours of a fault being reported. The payment is £40 for domestic customers and £100 for non-domestic customers for the first 24 hours and a further £20 for every additional 12-hour period during which the supply remains off.
The regulations on the standard of performance exempt companies from making the payments in certain circumstances. That is the catch. They may claim, in common with insurance companies, that a problem was caused by an act of God, severe weather and so on. I understand, however, that MANWEB has confirmed that it will make some minimum, ex gratia good will payments to customers who were cut off for 24 hours over Christmas day and Boxing day. Those claims are being dealt with individually.
However, under the standards of performance set by the regulator, customers must make a claim in writing if they were without a supply of electricity for more than 24 hours. If the company does not make a guaranteed standards payment because it is claiming an exemption, the customer can refer the matter to the regulator, who has the power to determine any dispute arising under the standards. The regulator must then decide whether it was reasonable for the company to claim an exemption. I hope that the report of the debate will be read by the regulator. The feeling of those who are in the Chamber is clear.
The Office of Electricity Regulation is reviewing the standards of performance and one issue being considered is whether customers should receive compensation automatically when their electricity supply is not restored within 24 hours, rather than the customer having to claim it within one month, and all the rest of it. We are pushing out that boat as far as we can.
Offer is also considering whether payments should be made according to the frequency of power cuts rather than the length of cuts. I think that that would be welcomed. We must push for that.
There is no doubt that overhead power lines are vulnerable to severe weather conditions such as high winds, snow and ice. As we all know, putting power lines underground in rural areas could be incredibly expensive. As for upgrading the line, I am tempted to agree. Why cannot we look for improvements? Most interruptions to supply are caused by incidents on the long radial 11 kV overhead systems, which go to the rural areas.
Other companies, dare I say, are already improving reliability without the expense of putting the wires underground. For example, a number of companies are
working on a new type of 11 kV overhead line that has insulated conductors. That has the advantage over bare conductors in reducing the number of interruptions caused by, for example, adverse weather conditions. There are technical questions to resolve, but it is not true that things cannot be done to upgrade the quality of the network.
"The issue that has been of particular concern to the Committee is that of capital investment. You will see at page 19/20"--
of the report that he sent me--
"that the Director General carried out a price review of the distribution network in 1995 and allowed a capital expenditure of £391.6 million over a five year period.
That goes to the heart of the problem.
Manweb propose to spend £338.9 million, a saving of £53 million . . .
Furthermore as the process of regulation is incentive-based it means that Manweb can use these monies for other purposes--such as shareholder dividend".
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