Draft Green Gas Support Scheme (Amendment) Regulations 2023
(Limited Text - Ministerial Extracts only)
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The Minister for Energy Security and Net Zero (Graham Stuart)
I beg to move,
That the Committee has considered the draft Green Gas Support Scheme (Amendment) Regulations 2023.
It is a pleasure to serve under your chairmanship, Mrs Murray. The draft regulations, which were laid before the House on Monday 16 October, make a set of changes to improve the administration of the green gas levy, which is charged to licensed gas suppliers in Great Britain, and ensure it works in line with policy intent. The regulations will reduce burdens arising from the levy for Ofgem, which administers it, and for gas suppliers. The green gas levy funds the green gas support scheme, which is a Great Britain-wide tariff-based scheme that facilitates ongoing investment in the biomethane industry and enables the development of new production plants for injection into the gas grid.
The amendments made by the regulations are technical and do not alter the aims of the GGSS or GGL; they will not add to the amount raised by the GGL or the rate at which it is charged. We have consulted the Scottish and Welsh Governments on the regulations. The Scottish Government have consented to them, as required under the Energy Act 2008, which provides the underlying primary powers for the regulations. The Welsh Government have also agreed to the changes.
The amount that the green gas levy collects is set according to a formula specified in regulations, and this statutory instrument will change the formula so that it will operate as always and originally intended. Regulations require the Secretary of State to publish a maximum amount that the green gas levy can collect, which is called the maximum levy amount. That is set at the total that the levy is expected to collect in its peak year. The statutory instrument will allow the maximum levy amount to be set by reference to whatever year is expected to be the peak year, members of the Committee will be thrilled to learn. The regulations introduce powers for the Secretary of State to set a de minimis amount for the green gas levy. That amount will apply to selected payment obligations and credit cover requirements. Obligations below the threshold will automatically be disapplied. The instrument makes five further minor changes.
In conclusion, the changes made by this statutory instrument provide the basis for the green gas levy to be collected efficiently and at the intended rate over the lifetime of the green gas support scheme. The instrument will help Ofgem to administer the policy effectively and as intended. It will reduce administrative burdens and ultimately benefit bill payers by reducing levy administration costs. I commend the draft regulations to the Committee.
Dr Alan Whitehead (Southampton, Test) (Lab)
It is a pleasure to serve under your chairmanship, Mrs Murray; we seem to be meeting rather frequently today, but that is always a pleasure.
The SI concerns the green gas support scheme, which is a scheme that I advocated for a very long time. I was delighted when it came in in 2021, and it has proved very successful in bringing about substantial advances in biomethane production and substantial increases in the amount of biomethane injected into the grid, thereby decarbonising the gas grid to a considerable degree. I hope it continues to be successful. We have to be careful that people who are in favour of sustainable aviation fuel do not seek to pinch that biomethane in the not-too-distant future, but that is perhaps a debate for another day.
As the Minister outlined, the instrument makes some very minor changes that streamline and make more efficient the operation of the scheme. Those are unexceptional changes, which we certainly support. I have two very brief questions—or rather, one brief question and a suggestion—as far as the changes are concerned. I would be grateful if the Minister could respond, and I am sure he will do so very briefly and succinctly when we get to that in a moment.
The first issue is that, as hon. Members will have seen, the interest that accrued in Ofgem’s account from the levy was, from the beginning of the scheme, added to, rather than deducted from, the levy collection target. Of course, that does not make much sense unless it was a mistake when it was first introduced in the framework. This instrument changes that addition to a deduction. My question is, what has happened to what appears to be an over-collection into the levy from gas suppliers, which are levied for the purpose of the support scheme? I am not a great advocate of handing back money that has been collected to make a scheme work, but has the Minister ever received any complaint or concern from the gas industry that it was being over-levied and would like its money back? I would imagine that, otherwise, it would stay in the support scheme and therefore make the MLA more appropriate to enabling the scheme to last longer.
The other point, which the Minister has mentioned, is that the maximum levy amount in the scheme is designed to, among other things, cope with the maximum point at which the levy is likely to be called on. It is a sensible change to make that maximum point rather more flexible on the decision of the Secretary of State. We want the levy to remain sufficiently flexible to finance the green gas support scheme after 2028-29, because we hope it will go on considerably longer than that.
Although the change is positive, it seems to me a little clunky. It is a fixed rate which requires the Secretary of State to take a decision on it. At that distance in the future, it is quite likely that inflation will begin to eat into the MLA seam. It might have been a better idea to index the MLA against inflation over the periods, leaving the Minister to take a decision only in the event that matters proved adverse to the passage of inflation over a period of time, rather than having to take a decision should things need adjusting even within that parameter.
Those are my only two comments on the scheme. I am sure the Minister will be delighted to know that I am going to stop very shortly.
Dr Whitehead
Those two clarifications would be very helpful to understand exactly where the changes to the scheme can best go, and whether we need to do any more work to make sure these amendments to the scheme stick as well as they are clearly intended to.
Graham Stuart
I thank the hon. Gentleman for his questions, and for his enthusiasm. He may be one of a tiny number of people who has quite that level of enthusiasm for these schemes, and I congratulate him on that, because they are important and excellent.
The hon. Gentleman asked whether the money being added rather than deducted was a mistake—yes, it was—and whether that money has been taken. To date, none of it has been taken because of the structure of the system, so there is no money to talk about. If it had been, it would have stayed in the levy and been rolled over, as any spare funds are in any case. It would have just been rolled over to the following year and thus have helped to reduce the levy the following year, so there are no worries on that front.
On the maximum levy amount, it now has the flexibility it requires. The Secretary of State can change the levy rate annually when the levy rate is set.
With no further ado, and with thanks to the Committee for its support for these technical arrangements, I commend this instrument to the House.
Question put and agreed to.