The task of creating a modern upper chamber in our legislature is one that has spanned several lifetimes and should have been resolved a long time ago.
For some media coverage see the BBC and an interesting Observer article.
The problem as ever is that people aren't agreed on what should replace it.
Personnally I favour a wholly elected chamber - it's much simpler, easy to understand and has democratic legitimacy. The whole issue of so called "cash for peerages" (they've managed to drag out the investigation for 11 whole months, with previous investigations covering "Who wants to be a millionaire?" ~ the police investigation costed more than the amount the contestant had allegedly sought to defraud, but wasn't even handed over - don't they have any serious criminals in London they need to be looking for?) means we should just seize this opportunity for a wholly elected chamber.
So they just need to get on with it.
Of course, the House of Commons needs to retain its supremacy. We don't want either Italian or US style gridlock. The House of Commons is elected at the time of the general election on the basis of a manifesto. They need to be clearly held to account on the basis of the manisfesto they stood on, which you can't do if you if you have (for example) to negotiate all your policies with a combined Tory/Lib Dem opposition entrenched in the "other place". Or vice versa.
As regards powers I do not, for reasons given above, favour extending the Lords powers in any way over ordinary legislation. After a General Election has taken place the upper house should not systematically block the will of the House of Commons, but should allow for more in depth debate and scrutiny and the chance to ask the Government to think again while being able to use the more substantive blocking powers (for instance) with the approval of delegated legislation such as regulations etc.
Some areas should be subject to approval from both Houses - changes to the Human Rights Act, changes to the term of a Parliament, the revision of a reformed "Parliament Act". I would also like to see us go down the Canadian path of the 'notwithstanding' clause, where the assent of both Houses is needed to override the provisions of the Human Rights Act (as well as any Bill of Rights we may end up with).
But the main business of the day should flow from the majority in the House of Commons, which sustains a Government elected by a General Election.
But above all they should just get on and do it.