Alternative Fuel Payment Pass-through Requirement (England and Wales and Scotland) Regulations 2023

Tuesday 14th March 2023 Grand Committee

Considered in Grand Committee

17:11

Moved by

[Lord Callanan]

That the Grand Committee do consider the Alternative Fuel Payment Pass-through Requirement (England and Wales and Scotland) Regulations 2023.

Relevant documents: 32nd Report from the Secondary Legislation Scrutiny Committee. Special attention drawn by the Joint Committee on Statutory Instruments, 29th Report.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, in moving the Alternative Fuel Payment Pass-through Requirement (England and Wales and Scotland) Regulations 2023, I will speak also to the Non-Domestic Alternative Fuel Payment Pass-through Requirement and Amendment Regulations 2023. These instruments were laid on 21 February and 23 February respectively and were debated last week in the other place.

The purpose of these instruments is to ensure that the financial benefits from the alternative fuel payment and the non-domestic alternative fuel payment schemes are passed through to end consumers. The non-domestic regulations also contain an amendment that corrects a drafting error in the Energy Bills Support Scheme and Alternative Fuel Payment Pass-through Requirement (Northern Ireland) Regulations 2023.

Before I begin, I thank the Joint Committee on Statutory Instruments, the Secondary Legislation Scrutiny Committee and the other place, all of whom provided helpful advice and feedback on these regulations. Time has not permitted us to incorporate everyone’s views into these regulations. None the less, we are grateful for the feedback that we have received. We will continue to explore and consider the comments that both the committees and Members of both Houses have given us, and we will consider how they can be reflected in the design of future regulations as well as current and future schemes.

The SLSC asked three questions. The first was on whether the effectiveness of the pass-through requirements of the other energy support schemes has been monitored. The second was whether there is any evidence of misuse of the application of “just and reasonable” by intermediaries to withhold the energy support from end-users. The third was whether there were any end-users recovering the energy support from their intermediaries via the courts system.

As my officials have now shared with the Committee, on the effectiveness of pass-through requirements, there is a diverse range of energy contracting structures, with many different forms of the supplier/intermediary/end-user relationship. The Government do not have visibility on the granular detail of these contracting structures and relationships. To our knowledge, this type of data does not currently exist in any aggregated verified source. Instead, we are monitoring the uptake of the energy support schemes where possible and putting in place evaluation of the pass-through requirements.

On the committee’s second question, we do not have evidence that the concept of “just and reasonable” is being misused by intermediaries to withhold support from intended beneficiaries. However, we will continue to monitor through our extensive stakeholder networks to make sure that the pass-through requirements are being met. On its last question, we are not aware of any tenants or businesses seeking recovery of support from their landlords through the courts where landlords have failed to pass on support. We will look into this as part of our evaluation of the effectiveness of the pass-through requirements.

17:15

I thank the committee for seeking the Government’s assurance on support reaching the intended beneficiaries of these schemes, especially those who are vulnerable. We fully recognise that some groups, such as older people or those with different abilities, are most vulnerable to the increase in the cost of living. We are therefore continuing our dialogue on pass-through requirements with consumer groups and charities, such as Age UK, Shelter and MoneySavingExpert, so that all eligible end-users get the money that they are entitled to. I also thank the Joint Committee on Statutory Instruments for its views.

In response to the unprecedented rise in energy prices that resulted from the war in Ukraine we have delivered critical support to households, businesses and other non-domestic consumers. Moving at pace, the Government brought forward emergency legislation on energy support last year, paving the way for support packages to be delivered rapidly across the entire United Kingdom. The domestic alternative fuel payment provides support to households that do not use mains gas, and which use alternative fuels such as heating oil. Eligible domestic consumers have received a one-off fixed payment of £200, paid via electricity suppliers. The electricity suppliers had until the end of February to provide the payment to all their eligible customers. Businesses, organisations and other non-domestic customers which use alternative fuel are receiving £150. These payments were made to electricity suppliers during February and March. Customers are already seeing these payments credited to their bills.

The instruments we are considering today are an important part of these support packages and of making sure that support reaches those who most need it. I appreciate that the Committee is already familiar with the purpose of pass-through requirements, as we have brought similar instruments to the Committee before. For those who may not be, let me explain what they do.

These instruments take the same approach as other energy schemes, in particular the energy bills support scheme and the energy bill relief scheme. They make it mandatory for intermediaries to pass through the financial benefit of the schemes to end-users. This is needed because we are delivering these schemes through electricity suppliers. In some cases, a supplier will have a contract with an intermediary and not the end-user of energy. For example, a supplier may have a contract with a landlord or with a heat network. When the supplier provides support to the intermediary, we need to make sure that it can then be passed on to the end-user in a just and reasonable way.

Let me clarify what we mean by end-user. In the case of both the alternative fuel payment and the non-domestic alternative fuel payment, an end-user is an individual who consumes energy or energy products—for example, a tenant who pays for their energy usage through their landlord. We are talking about tenants of different types: they can be domestic tenants, businesses or any other kind of organisations.

As with other energy schemes, these instruments require support to be passed on in a “just and reasonable” way. I know that the SLSC and Parliament have asked us what we mean by “just and reasonable” in these regulations. Let me clarify that matter and what we are working to achieve. The regulations have been drafted in this way to account for the many kinds of relationships between an intermediary and an end-user. If the Government took a narrow definition of “just and reasonable”, there is the risk of inadvertently excluding some intermediaries from the pass-through requirements. This also accommodates scenarios where intermediaries have multiple end-users to pass the support on to. They make it clear when and how intermediaries should communicate with end-users regarding the benefit being passed on.

Let me turn to the matter of enforcement.

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

My Lords, I hesitate to interrupt the Minister when he is on his feet but I am afraid there is a Division in the Chamber.

17:19

Sitting suspended for a Division in the House.

17:27

[Lord Callanan (Con)]

My Lords, I was just moving on to the issue of enforcement. The approach in these instruments is consistent with other energy schemes. If an intermediary does not pass on the benefit to an end user who is entitled to it, that end user will be able to pursue recovery of the benefit debt through civil proceedings. Should a court rule in the end user’s favour, they would be entitled to the payment plus interest. The interest is set at 2% above the Bank of England’s base rate.

The Government have published guidance on the GOV.UK website to ensure that requirements are clear to all parties. The guidance includes template letters to support end users, such as tenants, which they can use to contact their landlord should they be concerned about their energy bills. We are of course mindful of the concerns that this House and the other place have raised with us about enforcement. The Government will continue to keep the scheme under review. We will continue to work with a wide range of stakeholders to ensure that these pass-through requirements work for everyone who is in scope, including vulnerable groups. We want them to receive what they are entitled to.

In conclusion, these instruments are vital to ensure that support reaches the people it is designed to help. They are essential to the effectiveness of the alternative fuel payment scheme in Great Britain and the non-domestic alternative fuel payment across the United Kingdom. They will ensure that intermediaries pass on the support to those who really need it: those households and non-domestic energy customers who are most vulnerable to high energy costs. It is for all these important reasons that I commend these regulations to the Committee.

[Baroness Blake of Leeds (Lab)]

My Lords, I thank the Minister for a very full explanation of the SIs before us. I am pleased that the Government have fully caught up with the need to support consumers; I slightly disagree with the suggestion that this was done in a timely manner, but we and many others out there know about that. There was concern over a rather difficult period for the Government over the summer months but, on the back of this, I can underline that we will not oppose these SIs. We welcome them and want to see the help and relief that we have been discussing passed on, through the pass-through arrangements, so that people get the relief when they do not get the upfront sums directly.

17:30

Without going over the same information again, but picking up on the reports from the Joint Committee on Statutory Instruments and the SLSC, there has been concern around defects in the legislation that have been highlighted today. There is the fact that there are requirements in both pass-through SIs for the intermediary in the scheme to notify the end-user within 30 days of the provision of the scheme benefit of how and when the pass-through will take place and what amount will be passed through, and to convey the important information that the end-user can recover amounts to which they are entitled but do not receive as civil debt.

This is all quite straightforward, except that the committee highlighted, as the Minister touched on, that there is no sanction attached to the provision to cover cases in which the intermediary fails to inform the end-user in this way. I hear the comments that this will all be kept under review, but it would be useful to have some reassurance. If the review tells us that there are people falling through the net who cannot pursue the money due to them, exactly what action can be taken to ensure that they get the support they need? It is probably already apparent that there are consumers out there who do not know about the scheme and the benefits that can be given. If the intermediary does not pass on the information, there is a legitimate concern that people will miss out.

Obviously, the Government have responded to the information they received from the committee on the defect but, as we have heard, they decided not to amend the approach and effectively to ignore the provision in the Bill. We need to note that decision by the Government, so that we can come back to it in future if we need to do so.

I would like to know a bit more directly whether the Minister is comfortable with this state of affairs where the secondary legislation has written out a provision contained in primary legislation, potentially making the receipt of relief from bills much more difficult in the process. Is there a case for action against the Government by those who might be deprived of the information to which they are entitled in doing their own pass-through? We need to know what the redress is for people who struggle with the current arrangements.

Drawing matters to a conclusion, that is our main concern. I am interested to know how the information gained from the reviews will be communicated. Will we have sight of it? Will it come through to us? I would also like a better understanding of the vulnerable people who have failed to receive benefits. We have heard quite a lot in the media that significant numbers of people have failed to receive them. Take-up by the 7% of households which have traditional prepayment meters and are receiving paper vouchers is lower, with 76% of vouchers redeemed so far. It would be useful to know how many people that relates to—how many actual consumers.

In general, we want the SIs to progress; we want the payments to come out the door, but we remain mystified as to why there is not more of an enforcement regime surrounding them to ensure that the most vulnerable receive the money that is due to them.

[Lord Callanan (Con)]

I thank the noble Baroness for her valuable contributions to the debate. I reiterate that these instruments are necessary to ensure the effective implementation of the AFP scheme in Great Britain and the non-domestic alternative fuel payment schemes across the UK, by allowing support to reach those who need it. These schemes are already in place and are delivering support to organisations across the UK.

The domestic AFP scheme is delivering £200 to households that use alternative fuels such as heating oil, LPG, coal or biomass. The vast majority of eligible households received the payment automatically via their electricity supplier during February. A small proportion of households will need to apply for AFP support—for example, if they do not have a direct relationship with an electricity supplier and cannot be paid via that route. The non-domestic alternative fuel payment is delivering £150 to non-domestic customers who also use alternative fuels for heating, helping premises in Great Britain and Northern Ireland to meet their energy costs this winter. It will also deliver a top-up payment to the highest users of kerosene heating oil.

We are meaningfully engaging with stakeholders across the UK to promote and disseminate requirements for these schemes. Of course, we will continue to seek views and feedback from those impacted by all the pass-through requirements.

To respond directly to the point made by the noble Baroness, Lady Blake, about providing timely support to customers, I agree with her. The Government have moved at pace to develop what has been a very complex scheme to implement, bearing in mind that we are talking about significant sums of public money. We need to make sure that procedures are put in place to ensure that there is no fraud or gaming of the system.

The launch of the domestic and non-domestic AFP schemes follows months of close work with stakeholders across the country to deliver the Government’s help with the cost of living to customers. As I said in my introduction, we continue to listen to consumer groups such as MoneySavingExpert, housing associations, charities and others.

On the noble Baroness’s question about the requirement to notify end-users and the lack of any enforcement mechanism, we will of course continue to monitor the effectiveness or otherwise of the pass-through requirements. We acknowledge that these requirements have been stood up at pace, and we will continue to review them for the future.

In response to the noble Baroness’s point about letting customers know what they are entitled to, we are running extensive publicity schemes about the different benefits available to those who are eligible to apply for help with their heating bills. As I said, we continue to engage with stakeholders, including third-sector organisations, to reach communities who may be eligible, as well as regularly communicating through those same consumer groups. We are continuing to use social media during this period and encouraging stake- holders to amplify this message through their channels.

Finally, of course—the noble Baroness will appreciate this—we work very closely with local authorities, which are also able to promote the scheme on their own websites, through their own social media and through councillors and others who know their communities well. We also have online guidance for end users to understand their entitlement better. We really do want to see this help getting to all those people who need it, and we encourage parliamentarians, councillors and others to spread awareness through their own networks. We want to see this help getting through.

In response to the noble Baroness’s questions regarding how information resulting from the review will be communicated to Parliament, we would be very happy to write in due course to interested Peers, and the noble Baroness herself, on our monitoring of these pass-through requirements.

Domestic prepayment customers have been provided with a voucher that they are able to redeem within three months. Of course, prepayment customers on smart meters have their bills credited automatically. It is only those on old traditional meters who need to receive their prepayment vouchers. Some can get them on their mobile phones; some are sent them through the post. Non-domestic prepayment customers will instead be provided with a £150 cheque. Customers who have not been provided with this automatically will, of course, be able to apply directly through the alternative fund, which opened for domestic customers on 6 March.

I hope that this has dealt with all the noble Baroness’s questions, and I commend these regulations to the House.

Motion agreed.