Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022
Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022
Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022
Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022
Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments 2022
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kevin Hollinrake)
I beg to move,
That the Committee has considered the (Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1101).
The Chair
With this it will be convenient to discuss the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1102), the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1103), the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 (SI, 2022, No. 1124) and the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022 (SI, 2022, No, 1125).
Kevin Hollinrake
It is a pleasure to serve with you in the Chair, Mrs Murray. The regulations in the first three of the five statutory instruments we are discussing were laid before the House on 31 October, and the remaining two measures on 4 November.
Last Monday, my colleague the Minister for Industry and Investment Security, my hon. Friend the Member for Wealden (Ms Ghani), set out the details of the Government’s energy support schemes: the energy price guarantee or EPG, the energy bill relief scheme or EBRS, and the energy bills support scheme or EBSS. In Committee today, I will explain the pass-through requirements in respect of the schemes.
The Government have responded rapidly to the unprecedented rise in energy prices by introducing emergency legislation on energy support. That support will protect homes and non-domestic customers across the UK against inflated energy prices so that families and consumers will be supported in their cost of living this winter.
The various regulations have been created under the Energy Prices Act 2022, which gained Royal Assent on 25 October 2022. They are essential secondary legislation to implement the energy schemes. The pass-through regulations ensure that the Government’s energy support reaches families and consumers. Rather than expecting intermediaries to act of their own accord, we are requiring that they must pass on the financial benefit to the end users.
The requirements take into account the diverse range of contracting structures relating to the supply, resale, provision and charging of energy. As such, an intermediary is any individual or organisation that is party to an electricity or gas contract and receives energy price support in relation to that contract, or receives a pass-through of reductions attributable to that energy price support. The intermediary must pass on the costs of energy supplied and any reductions attributable to the energy price support to an end user—for example, landlords or property managers of a residential building.
The various regulations also cover intermediaries supplying a product or service where, contractually, a component of the price relates directly to the use of energy for the supply of heating or hot water—for example, park home managers, heat networks and electric vehicle charging operators. Taken together, the regulations apply to all three energy schemes, the EPG, the EBSS and the EBRS, including customers who are part of heat networks.
Turning to how the pass-through amount should be calculated, intermediaries can adjust the amount they pass on based on charges to end users. They must demonstrate to end users that that amount is just and reasonable. Intermediaries can take into account the extent to which they have increased their charges to end users as a result of the energy crisis. If they have shielded their end users from the impact of increased energy prices, it may be just and reasonable for them to retain some or all of the scheme benefit. For example, if a landlord charges their tenant an all-inclusive rent, incorporating a fixed charge for energy use, heating or hot water, they must pass on the discount in a just and reasonable way.
If the intermediary does not pass on the benefit, the end users can pursue recovery of the benefit as a debt through civil proceedings. Should a court rule in the end user’s favour, they will be entitled to the payment plus interest. The interest is set at 2% above the Bank of England’s base rate. This will begin to accrue from 60 days after the intermediary first receives the relevant scheme benefits. The enforcement approach is the same across the schemes, with a slight nuance for heat networks under the EBRS. If heat network customers do not receive the pass-through or information from their heat supplier, they will be able to raise a complaint with the energy ombudsman.
We have published guidance on the pass-through regulations to help those affected understand how to comply with these regulations. This Government guidance includes advice for landlords on how to meet their pass-through obligations. There are also template letters for tenants, should they wish to raise concerns with their landlords about their energy bills. Another SI will be laid later this month to correct some mistakes in the original heat supplier regulations.
In conclusion, these regulations protect those most exposed to high energy costs. The pass-through requirements allow cost savings to reach the people the Government intend to support, such as tenants and other individuals. Importantly, the regulations also provide routes for energy users to benefit from the discount they are entitled to in scenarios where intermediaries are not meeting their legal obligations. I commend the regulations to the House.
Kit Malthouse (North West Hampshire) (Con)
I also want to raise a couple of issues about the technicalities of the scheme. I agree with my county colleague, the hon. Member for Southampton, Test, that the measures are important and need to be passed through as soon as possible. As somebody who has two sets of park homes in my constituency, I am particularly keen to see them benefit from the subsidies to protect them from an energy point of view.
I have a couple of questions for the Minister. These are quite complicated regulations when one ploughs through them—I tried this afternoon. I want to understand what the impact will likely be on individuals who are resident, for example, in a care home and for whom there is a service charge calculation as part of the bill levied on them for their residence in the care home. As I am sure my hon. Friend the Minister knows, in most care homes there are those who are paid for by the state and therefore protected by the state—to a certain extent their charges are supervised by the state—and those who are there on a private basis and might not have families or others who are close to the action and able to see the impact on their bills.
My other questions are about the technicalities. In providing the subsidy at this time to families up and down the land, the Government are recognising that timing matters. Having the money at the point when someone has to pay it out to their energy supplier matters because cash flow for many people is critical. Some of the regulations refer to timing, but the legislation is not as exacting as the obligation it places on what it calls intermediaries—landlords. The best it can come up with is
“as soon as reasonably practicable”.
My hon. Friend the Minister, who I know has a long track record in the property industry, knows that the timing of cash flow, particularly for large landlords such as park home owners, is critical, and it would be possible for them to string out the payment of the subsidies, after having received them themselves for some time, in order to gain a cash flow advantage. As he reviews the operation of the legislation will he consider an absolute requirement that, on receipt, the subsidy should be passed through at the very next billing opportunity, rather than being held for six or nine months? How soon is “reasonably practicable”? “I am terribly sorry, your honour. We were terribly overworked.”
Sir Oliver Heald (North East Hertfordshire) (Con)
It seems that in a case where the intermediary has received the money, interest is payable to the resident if it has not been paid over within 60 days. Does my right hon. Friend think that that is perhaps an indication of what a reasonable period is thought to be?
Kit Malthouse
It may well be, but, as I say, regulation 3, paragraph 2 in part 2, states that an intermediary
“must ensure that as soon as reasonably practicable after a scheme benefit has been provided”.
As interest rates rise, it would be perfectly possible for a landlord to say, “Do you know what? I’m getting 3% on my money, particularly as it is a large amount. My cost in holding it is only 2%. I have a bit of a carry there.” While my right hon. and learned Friend is right that the 60 days indicated in the legislation is “practicable”, that is quite a long time for somebody to shoulder an energy bill, particularly if there are quarterly billings, for example. It would therefore be possible for me to pay my bill in one quarter and not receive the subsidy until the following quarter, which is a three-month carry—or possibly more, if the timing is not right. Will the Minister comment on that timing?
The other issue I want to raise is about enforcement because, as the Opposition spokesman, the hon. Member for Southampton, Test, mentioned, enforcement is through the civil courts, which means the small claims court for most people. That carries a minimum charge of £35, takes time and creates delay. It would be perfectly possible for a landlord to say, “Well, I’ll tough it out. The subsidy is only 200 quid. My tenant has to shell out 35 quid and put in a submission to the small claims court. That will take a while to work its way through the system and then, at the last minute, I will agree to pay.” I do not understand why there is not an absolute liability enforceable on the landlord to pay, either by the local authority or others.
Finally, I want to raise the rather strange obligation on the intermediary to show that
“the pass-through it has effected…is just and reasonable, and in so doing it is entitled to take into account the extent to which its charges to end users reflect the increased cost of energy as a result of the energy crisis.”
We are all aware that lots is going on in the world of energy and that prices have risen. If an elderly resident of a park home has that in their mind, to the extent that they have been assiduous about their consumption of energy—they have turned their heating off and tried to drive down their bill as much as possible—it is conceivable that their energy costs this year could be lower than last year. If they had not read the newspapers or did not know about this legislation, it would not necessarily be clear that they would be entitled to a subsidy, notwith-standing that the cost of the energy they had used this year was lower in terms of the cost to the landlord than it was last year.
I am not a lawyer, although there are eminent lawyers in the room, but in those circumstances would the landlord be able to say, “Last year, tenant, you were paying 400 quid; this year, because you have been parsimonious, you are only paying 300 quid. Therefore, you are better off so I will pocket your subsidy.” I would be grateful if the Minister could address those questions.
Sir Oliver Heald
I will not be venturing any legal opinion, but I understand that the three national associations of park home residents already provide a certain amount of legal help and advice to residents and residents’ associations. Have the Minister and his colleagues had the opportunity to be in touch with such associations, with the idea of ensuring that park home residents are aware of their rights under these regulations and that they would be able to take action in the county court—maybe even by producing a simple form to report claims, so that that can be done easily?
Kit Malthouse
I understand the point made by my right hon. and learned Friend and I agree with him. However, anything that goes to court, as he will know because he has made a profession of it, is arguable. Obviously, the legislation is drawn to make it arguable; I do not understand why there is not an absolute liability.
Sir Oliver Heald
I fully understand my right hon. Friend’s point. The problem with this area is the Mobile Homes Act 1983. There have always been criticisms of the relationships involved in park homes, as it is not the same as home ownership or being a tenant. Having said that, the legislation is an attempt to do something in this difficult area to try to ensure that park home residents get their help with energy costs; I wish the regulations well and I would not want to stop them happening. Is there a way of helping some of the residents with the legislation? My right hon. Friend’s point that many of them are vulnerable and elderly is true.
Kevin Hollinrake
I thank right hon. and hon. Members from across the House for their comments. I will address the points made by the shadow Minister first. He is right to point out some of the deficiencies in the scheme, in that there is great diversity in the number and type of intermediaries. Ideally, we would have liked one ombudsman that covered every sector; instead, we have park home site owners, landlords, electric-vehicle-charger operators and heat-network operators all having different ombudsmen, or sometimes an absence of any ombudsman. That is the challenge behind the measures we are putting in place.
The other challenge is having to design a scheme of such complexity at pace, with a diversity of suppliers and intermediaries. I gently challenge the shadow Minister on the point about park home residents, or people from a different cohort, not having got a penny yet. That should not be the case. Most landlords and park home site operators are decent people who will be doing the right thing and trying to help their residents through a very difficult time. This instrument just legalises and formalises the process. Often in this place we try to legislate to ensure that everyone is responsible for doing the right thing.
The shadow Minister asked about vulnerable customers, as did some other Members—not least my right hon. and learned Friend the Member for North East Hertfordshire. We have engaged extensively with consumer groups, representative organisations, Citizens Advice, local authorities, food bank operators, faith groups and some of the operators behind the park home associations to try to ensure that people are aware of the requirements on them to pass on the support provided.
Heat networks are a separate cohort and an exception in this whole discussion because they are already covered by the energy ombudsman; it is therefore easy to make them accountable to the energy ombudsman. Landlords do not have that kind of relationship with the energy ombudsman, or with any ombudsman. The Government have put forward a consultation and they intend to ask all landlords to be members of a redress scheme. I would have welcomed that move because it would have made the scheme far easier to implement. But at the moment that has not happened, so we have to make these measures subject to the courts. That is the only available method.
Dr Whitehead
I am a little puzzled by this. The ombudsman to whom we are referring is the energy ombudsman, and the energy ombudsman has standing as far as all matters pertaining to energy are concerned. Although I agree that the particular circumstances of intermediaries are different, they are all bound by the fact that the issue is about energy, so the energy ombudsman should have traction as far as those different cases are concerned. My concern that the energy ombudsman appears to act where heat is concerned, but not where electricity is concerned, has not been assuaged. Can the Minister expatiate any further on why that difference is there?
Kevin Hollinrake
I share the hon. Member’s concerns, but I can only reiterate that the energy ombudsman does not cover landlords. Landlords are not regulated by the energy ombudsman, so there is no recourse to the energy ombudsman. There has to be a relationship between the two. As I have said, moves are afoot to deal with the issue, but if the Opposition have ideas on how we do this more effectively they should write to us, and we can write back to them to say why not.
The shadow Minister asked for sanctions for people who do not comply, but we do not see any way to impose sanctions without regulations having been in place before the scheme was brought to bear. For all those reasons, I think it is not possible to do what he wishes, but as I say, if he has some ideas on how we might, he should write to us.
My right hon. Friend the Member for North West Hampshire made some very good points about care homes, and how their residents will benefit from the scheme. If service charges include energy provision, it would be just and reasonable to pass on the benefits of the EPG or EBRS to those residents. Although we do not want to see residents having to take landlords or the people who provide their accommodation to the courts, I think the courts would take a very dim view if the support had not been passed on to those residents.
My right hon. Friend the Member for North West Hampshire made another good point. What about if someone had been parsimonious and reduced their energy use? Would they still see the benefit? The Government support, as he knows, is provided on a per kilowatt-hour basis, so we would expect support to be passed over on that basis. If someone has done the right thing and reduced their energy use, they should see the full benefit of that, both in terms of the reduction— the energy they have not used—and the cost covered by the various schemes that apply.
On the point about “as soon as reasonably practicable”, I would expect the courts to take a dim view of somebody who had pocketed the money for 60 days and let the interest pile up.
Kit Malthouse
Could the Minister explain why there is not an absolute liability to pay? Why is there interpretation that makes it arguable in court? It could be a case of saying, “I have had £400 on your behalf from the Government for your energy, but I am not giving you £400 directly.” Why is there not a straight pass-through?
The Minister has a long and distinguished history in the property industry. He will know that service charges are subject to reams and reams of detailed litigation in the courts and that the crafting of a service charge bill is an art as much as a science. It can be a question of what people can get away with. I do not understand why we would inject the same kind of negotiability and arguability into what should be a straight pass-through.
Kevin Hollinrake
My right hon. Friend raises a good point. The difficulty is the different ways energy can be levied to a resident. The landlord might already have passed on the benefit to that individual. They might have already said, “I am not going to put your rent up, because I see a Government scheme coming down the line that means I can shield you from the costs of energy.” At that point in time, it is not easy to determine whether a tenant has or has not already had the benefit from the scheme. It can be expected that people will get the absolute benefit of the schemes, but how the landlord chooses to pass it on is complicated. It is not possible to have a one-size-fits-all solution.
Kit Malthouse
Just to understand, the Minister is saying that a landlord may charitably say, “I will reduce your rent because I see the energy bill rises coming. I feel sorry for you, and I want to protect you as my tenant. Therefore, I will not pass through the full subsidy I have from the energy scheme, because I have already given you that subsidy, effectively, through a rent reduction”?
Kit Malthouse
Even though the tenant may say, “Actually, rents in our area are plunging anyway, so you have taken advantage of a market dynamic”—in, say, Hartlepool or Andover or wherever—“that means you were going to have to take less rent anyway.”
I do not want to labour the point. This is an important measure that needs to go through quickly, so I will not cause too much fuss, but injecting arguability and negotiability into what, for everybody else who is directly contracted to their energy bills—it just comes straight to us—is not negotiable, seems to me to be making these people’s lives more difficult than they need to be.
Kevin Hollinrake
My right hon. Friend makes the exact point. It may not just be the fact that the rent now charged reflects the increased cost of energy and the Government subsidy. It may also reflect that rents have changed in the area. They may have gone up or down. All these things are subject to market forces. The only way we can practicably deal with this is to require landlords, park home owners, or people who look after care homes to be just and reasonable in passing on the support to the individuals concerned.
Mark Pawsey (Rugby) (Con)
There is one thing that the Minister may not have considered so far. The park home owner has 60 days to pass the money on to the park home residents. What would happen in a circumstance where the park home owner’s business went into liquidation and they had already received the funding support for Government but not yet passed it on to the tenant? Is there some comfort that the tenant might have in those circumstances?
Kevin Hollinrake
My hon. Friend raises an interesting additional complexity, which I am not sure is dealt with in the regulations. However, again, there will still be a requirement for the administrator to pass on the benefit in that circumstance, I guess. That might be something I can discuss with officials and write to my hon. Friend about, if he is sufficiently concerned.
My right hon. and learned Friend the Member for North East Hertfordshire made a point about engagement with landlords. As I have said, we have done that, and we are certainly very concerned about the passing-through in all these schemes, particularly to the vulnerable. That is why we are working with organisations such as Step Up, Citizens Advice, charitable groups and food banks to make sure those people are sufficiently supported and that benefit is passed on to individual residents.
Dr Whitehead
I suspect the Minister has moved on from addressing my particular concerns, but one question I did raise was the extent to which the Department is monitoring the success or otherwise of these changes. What actions might the Department take to indicate whether they consider the scheme to be a success or not, and if not, whether they want to do anything about it? Is the Minister able to say tonight that after, say, a two or three-month period, he will make a statement to the House—not necessarily an oral statement; it could be a written statement—about what the Department thinks is happening with these schemes and, if it finds adversely as far as their success is concerned, what it might do about it?
Kevin Hollinrake
The hon. Gentleman makes a very fair point. We will always keep this matter under review, and there are many different ways he can choose of holding the Government’s feet to the fire for doing that through their Departments. There are many different mechanisms for that, which I do not need to outline to him. However, I can absolutely make a commitment to the hon. Gentleman that myself and my colleagues in the Department will make sure that these measures are effective and do what we want them to do. Of course, we always have the opportunity to refine our approach through legislation if we do not feel it is working as it should.
In conclusion, the regulations protect those who are most exposed to high energy costs. The pass-through requirements allow cost savings to reach the people that the Government intend to support, such as tenants and other individuals. Importantly, the regulations also provide routes for end users to benefit from the discount they are entitled to in scenarios where intermediaries are not meeting their legal obligations. I commend the regulations to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1101).
ENERGY BILLS SUPPORT SCHEME AND ENERGY PRICE GUARANTEE PASS-THROUGH REQUIREMENT (ENGLAND AND WALES AND SCOTLAND) REGULATIONS 2022
Resolved,
That the Committee has considered the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1102).—(Kevin Hollinrake.)
ENERGY BILL RELIEF SCHEME PASS-THROUGH REQUIREMENT (ENGLAND AND WALES AND SCOTLAND) REGULATIONS 2022
Resolved,
That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1103).—(Kevin Hollinrake.)
ENERGY BILL RELIEF SCHEME PASS-THROUGH REQUIREMENT (HEAT SUPPLIERS) (NORTHERN IRELAND) REGULATIONS 2022
Resolved,
That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 (SI, 2022, No. 1124).—(Kevin Hollinrake.)
ENERGY BILL RELIEF SCHEME AND ENERGY PRICE GUARANTEE PASS-THROUGH REQUIREMENT AND MISCELLANEOUS AMENDMENTS REGULATIONS 2022
Resolved,
That the Committee has considered the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022 (SI, 2022, No, 1125).—(Kevin Hollinrake.)