Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022
(Limited Text - Ministerial Extracts only)
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Lord Callanan
That the Grand Committee do consider the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022.
Relevant document: 24th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, these regulations were laid before the House on 6 December 2022. We have already passed legislation concerning the energy bill relief scheme pass-through requirement for heat suppliers, which ensures that benefits from the energy bill relief scheme, known as the EBRS, are passed through to end consumers on heat networks. This legislation also provides for a route to resolve disputes between consumers and heat networks on these pass-through requirements.
This statutory instrument amends the pass-through regulations, introducing a requirement on heat suppliers to send a simple notification to provide information to the Secretary of State by 6 January 2023. This information, which includes heat suppliers’ names, business addresses and contact details, will be shared with the energy ombudsman and the Consumer Council for Northern Ireland to support their handling of domestic and micro-business consumer complaints. This information will also be shared with the Office for Product Safety & Standards—the OPSS—for enforcement purposes.
The SI strengthens the OPSS’s powers of enforcement, enabling it to request information from suspected heat suppliers to determine whether they fall within the scope of the regulations. The OPSS may also impose existing civil sanctions, including a monetary penalty on heat suppliers who fail to comply with the requirements to notify, join the redress scheme or provide information. The monetary penalty has been modified, providing for a maximum of £5,000 to provide an effective deterrent for non-compliance.
The SI also amends the existing regulations to reduce the administrative burden on heat network companies, removing the requirement for heat suppliers to provide information about the calculation of the benefit when they first notify end-users about the scheme, while retaining the requirement to provide these calculations in the next bill.
The EBRS and the corresponding pass-through regulations have been introduced as a critical component of support for consumers on heat networks and complement other support that the Government are providing with energy and the cost of living. We expect that the notification requirements will facilitate the consumer complaints handling process and that the strengthened enforcement powers will result in a higher number of heat suppliers passing on the EBRS discount to their customers. I commend the regulations to the Committee.
Lord Teverson (LD)
My Lords, I thank the Minister for going through this piece of secondary legislation, which concerns what is clearly an important subject: making sure that the money that is in effect discounted from bills gets through to the final consumer.
It is probably unfair to say this but, having read through this instrument, I would be amazed if the dispute process is ever used or anybody ever gets round to being able to take advantage of it. To be honest, a maximum fine of £5,000 hardly seems a great deterrent to anybody, but there we are; I suspect it will be not a great deal of money in terms of the P&L account of any of these providers, so I am rather surprised that it has been pegged at that amount.
The thing I am really interested in is that, as I read it, a core part of this piece of legislation is finding out the contact details of heat suppliers. If we do not know that information, how do we get in touch with the suppliers to find it out? I do not understand that. Given the fact that this measure was supposed to have happened by 6 January, as this is all in retrospect, clearly this has happened; I am just interested to understand from the Minister whether the Government have had good responses and replies from everybody. How do they know that everybody has replied? I would be interested to understand that.
The only other area I want to probe—the Minister will forgive me, as I should clearly know this—is the Office for Product Safety & Standards, because I had never heard of it before. I am sure it is a well-known organisation in certain parts of the sector, but I am interested in briefly understanding to whom it reports, its status and whether it is tooled up to do this work effectively. However, I thank the Minister, as this is clearly important secondary legislation and I support making the scheme effective.
Lord Bassam of Brighton (Lab)
My Lords, I do not have a great deal to add and obviously we do not oppose these regulations, but it seems that they have come forward urgently because the department appeared to forget, when making the original regulations, that—as the noble Lord, Lord Teverson, said—there is no complete register of heat suppliers in place that would enable the original legislation to be properly carried out. The original legislation went through without a word about why the department did not know who the energy suppliers were and how that made the legislation somewhat redundant and difficult to implement.
It seems that we have in front of us a rapid and somewhat scrambled fix to try to rectify that original problem. No doubt the Minister will tell me that I am wrong, but it seems to exist because the department forgot that a rather central part of the method of getting money to customers is through heat suppliers, which should be known to the department to make them pass the money through. Why is the scheme so last-minute and retrospective? Should it not have been up and running and operating earlier so that customers could benefit?
The Explanatory Memorandum for this SI says that this must happen in order to get money to customers over the winter period, so my question to the Minister is: how has this happened? Why have the regulations been introduced suddenly, and why now when this should have been done earlier? How much time has been lost in getting money to customers as a result of the scheme being incomplete when it was introduced? Finally, have customers lost out or been disadvantaged in any way? That is probably the key point, because people are getting much higher bills than they would have expected a year or 18 months ago. Judging from my experience, although I am not struggling to pay, people are being shocked and taken aback.
I looked at the Explanatory Memorandum and it seemed there were one or two errors. The instrument makes corrections to definitions of “end-user”, “intermediary” and “scheme benefit”. That seems glaring. The Explanatory Memorandum says that suppliers need
“more time to provide their customers with detailed calculations”.
I would have thought that that problem could have been anticipated and dealt with earlier. That is a concern. I also spotted, in the “policy background” section that
“The heat network sector is not currently comprehensively regulated and there exists no complete record of heat suppliers.”
This is quite revealing. I appreciate that the instrument attempts to address this, but it is something of a gap to have left in the first instance. Although I was sort of impressed by the consultation exercise, a workshop with 120 heat suppliers in October hardly seems a complete consultation to my way of thinking. In its section on impact, the Explanatory Memorandum also refers to “light-touch notification”, so that heat suppliers
“in effect are given an extension on the deadline for making the much more comprehensive notification under the”
billing regulations.
I may have misunderstood this, but I do not think I have. By my way of reading it, it is not an entirely happy story. I look forward to hearing the Minister’s explanation of why and how this came about.
Lord Callanan (Con)
I thank both noble Lords for their valuable contributions to this brief debate. The Government have put in place robust measures to support consumers in response to the energy crisis. For heat network consumers these measures include the EBRS—energy bill relief scheme—or alternative funding for those without a domestic electricity meter, and the energy price guarantee for electricity. These schemes are up and running, shielding heat network consumers and countless others from excessive energy bill increases this winter.
The measures in today’s SI continue this work by strengthening the legal framework for ensuring that cost reductions from the EBRS received by heat networks are passed on to heat network consumers, leading to immediate short-term benefits to consumers over this winter. This SI results from wide-ranging engagement with industry, including trade associations, heat suppliers and consumer groups in the sector, and ensures an approach which works for both consumers and businesses. The changes are based on practicalities, meaning consumers will be informed of key information without placing an undue burden on heat suppliers.
Turning to the specific points raised by the noble Lords, I start with the noble Lord, Lord Teverson, who asked the obvious question: great minds think alike, as it is the same one I asked when I was introduced to this statutory instrument. How do we know that we have received a good response, as the deadline has already passed, and that everyone has replied? The figures are that, as of last week, we have received notifications from over 2,800 heat suppliers. Previous data obtained from notifications collected under the Heat Network (Metering and Billing) Regulations indicated that there were approximately 2,600 heat suppliers in 2018. We therefore judge that heat supplier engagement with the EBRS pass-through notification form has been good.
Of course there are some enormous heat networks, which everybody knows about, but also some quite small heat networks. Many developers just develop a block of flats, install a heat network and then subcontract out its management to a secondary company—some with great success and others with not such great success. Many people do not realise that they are on a heat network until they have already moved into the property, because it has elements of monopoly about it. If the noble Lord had been present in the debates on the Energy Bill, he could have discussed the fact that we are introducing powers to regulate heat networks, which will be given to Ofgem. We have been having debates separately with the noble Lord, Lord Teverson, and others on that but at the moment the sector is essentially unregulated, which has caused problems in some areas. There are some very bad examples of networks, which we will attempt to rectify.
The noble Lord, Lord Teverson, also asked about the role of the OPSS in ensuring enforcement, which was similarly raised by the noble Lord, Lord Bassam. The OPSS already had a role to receive notifications from heat suppliers and is therefore a natural fit. Notifying is actually a simple process, which should take about five minutes to complete. We would press any heat network suppliers which have not already notified—from the figures, we think that the vast majority have—to do so as soon as possible to ensure the avoidance of enforcement action. Again, all the big ones were known anyway and have complied. It is possible that there might be an odd mansion block or small block of flats somewhere, or some remote properties, that have not yet notified but we think the vast majority have.
If the supplier has not submitted its notification by 6 January or within 30 days of beginning operations, or for any new heat suppliers that began operating after 7 December last year, the OPSS may issue a notice of intent which makes clear the required actions and gives the business the opportunity to become compliant with the regulations. Should the heat supplier then continue to fail to do so, the OPSS may issue a notice of compliance, which sets a final deadline for the supplier to submit its notification after which point, if it is still non-compliant, it may be issued with the penalty fines that I referred to earlier. If the heat supplier does not engage with the ombudsman, or the Consumer Council in Northern Ireland, customers can recover the benefit that they are owed as a civil debt.
In response to the questions asked by the noble Lord, Lord Bassam, about why we are having the debate only after the notification window has closed, these regulations came into effect the day after they were made, on 7 December. This debate has no real bearing on the notification window but is to give time for parliamentary scrutiny and to ensure that this affirmative SI, as it was, does not now fall. We thought the “made affirmative” procedure was appropriate, given the time-sensitive nature of this work. Customers need support as quickly as possible, so ensuring prompt EBRS pass-through is important to provide that support. That underlines the rationale of running the notification window from the earliest possible date after the regulations were made.
The noble Lord, Lord Bassam, also asked a very reasonable question about why we are amending relatively new SIs. The answer is that following the initial regulations, which were made very rapidly given the urgent nature of the problem, we have taken on board feedback from the sector to ensure that this final approach now works for both businesses and customers.
The noble Lord also asked why the definitions of intermediaries have been amended. The amendments distinguish obligations that do not apply to an intermediary who is also an end-user. That could be a landlord, for example. The requirement to join the redress scheme will not apply unless the intermediary is provided with a scheme benefit by way of a discount or reduction under the Energy Bill Relief Scheme Regulations, nor will it apply to a person who supplies heating to the final customer unless that person is provided with a scheme benefit by way of a pass-through under these regulations. A landlord provided with a pass-through amount under the pass-through regulations, which it in turn must pass on to its tenants, will not be required to join the redress scheme unless that landlord also supplies heating through a district or communal heat network. Similarly, an intermediary who is also an end- user will not be required to notify an authorised person of their name, business address and contact details.
The noble Lord also asked why heat network suppliers are being given an extension on the requirement to complete their heat network metering and billing notifications. The answer is that these regulations will introduce minimal costs on heat networks. The information required is information that heat suppliers will already have access to, and we are not requiring heat suppliers to provide information beyond that which they already provide to government under the Heat Network (Metering and Billing) Regulations. We consider that the benefit of heat network consumers receiving lower heat prices resulting from the EBRS pass-through will significantly outweigh these relatively minor administrative costs to heat suppliers. By completing the notification requirement under these regulations, a heat supplier gains an extension in complying with the Heat Network (Metering and Billing) Regulations until 31 March 2023, so this further reduces the burden on the business over what, I think we agree, will be a challenging winter period.
I hope I have successfully answered the questions from both noble Lords, and therefore I commend these regulations to the Committee.
Lord Teverson (LD)
Can I just follow up on a couple of things? Given that this is an unregulated sector and one in which there are issues, as the Minister said, will the OPSS undertake some sort of random survey of end-user customers to make sure that this is getting through to them, so that there is some form of check? I would be interested to understand whether the Minister or his department has any estimate of the proportion of final consumers who have now received payment.
Lord Callanan (Con)
Consumers would not receive payment as such; they would just receive the appropriate discount off the bill presented by the heat network. I am sure the OPSS will want to monitor the market. I think it will primarily be driven by complaints from customers. I assure the noble Lord that, based on my postbag, customers are very willing to complain, both to their Member of Parliament and directly. Because the OPSS is responsible for the original billing regulations, it is best placed to carry out this work and I am sure it will conduct the appropriate market monitoring.