Energy Bill [HL]

Baroness McIntosh of Pickering Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

[Lord West of Spithead (Lab)]

Well, yes, it hates to spend money full stop, but especially on resilience. Whether it is the loss of our GPS system and how we would counter that or PNT, there is a whole raft of areas where it is really unwilling to move and spend money even though these things are crucial. In this case, it is extremely important that we have the ability to store gas as we move into the future. I agree totally with the noble Lord, Lord Moylan, that the amount we have to store may vary quite dramatically.

Earlier, the Minister spoke about how we have infrastructure built to bring LNG into this country. We certainly do—I was heavily involved in ensuring that we got the right ships from the North Dome in Qatar to Milford Haven and setting up the infrastructure there. It was meant to provide 15% to 30% of our LNG. That was fine when people were not outbidding us for that LNG. That is the problem now; we cannot guarantee that that LNG will come to us, so we need some form of resilience. I believe that resilience should be our having some gas storage capability.

I have to get a naval thing in. It is interesting that, between the two wars, we forced the Treasury to ensure that our then 850-ship Navy—it is a bit smaller now—had sufficient fuel stored in this country to fight at war rates for six months. Someone in government had calculated it. We have to have a calculation; 25% might be wrong, but there is a requirement for some storage. We need to think very hard and the Government need to come up with a view from their experts on how much that should be. It may dwindle in time, but we certainly need it in the near term as quickly as possible. I very strongly support Amendment 225.

[Baroness McIntosh of Pickering (Con)]

I join the noble Lord in his support for my noble friend Lord Moylan’s Amendment 225. I have been minded to table something similar, so I was delighted when my noble friend was able to fill the gap. I believe that the amendment seeks to address not just resilience but security of supply, and I am delighted that it is in the form of a probing amendment and that we leave open the amount of storage that we seek.

My concern, which we touched on in Oral Questions, is the woeful shortage of gas storage at this time. I understand the reasons why Centrica closed its gas storage, which I understand was in Yorkshire, in 2017. But, as my noble friend Lord Callanan said in response to the Question today, the circumstances then were very different from today. I understand that, currently, the facility could possibly store between 10 and 12 days at full capacity. I understand that talks are ongoing in this regard; what status are they at? If they are successful and Centrica, or indeed another operator, was minded to open or reopen these facilities, what is the optimum number of days of storage? I prefer to talk about this in days of storage rather domestic consumption, but I will leave that to those more expert than me. What is the current capacity for gas storage? Back in March, I understood that Germany had something like 120 days’ storage and we had only a possible maximum of 30, which may even have been an overestimate of the capacity.

What percentage of gas is currently being supplied to this country by interconnectors from Norway and perhaps other suppliers? Also, what is the percentage being delivered by tankers? For the reasons of resilience and security of supply, and given that there are European countries that are more dependent on Russian sources of gas than we are, can we be absolutely sure about the threat that the current supplies to this country through interconnectors and tankers might be diverted to other European countries if the situation in Russia were to deteriorate further? I understand that this is a source of some concern. Germany is one of the countries most dependent on Russia for current gas supply. I understand that it reached its target for days of gas storage ahead of schedule. It has also stored underground just over a fifth of the gas used in the whole of last year, 2021.

Finally, the flip side of gas storage and the potential cap on spending, which we might learn of tomorrow, is trying to encourage all of us to use less of the finite resource of electricity and energy. Could my noble friend shed some light on that? Will we hear more tomorrow?

[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendment 225 in the names of my noble friend Lord Moylan and others. The noble Lord, Lord Oates, raised some good questions in this area. Gas storage is not only important; it can also be a thing of beauty, as I know from my days watching cricket at the Oval, with its famous gas-holder backdrop. Perhaps it can be revived—I say rather fancifully.

This year’s crisis has shown how vulnerable we are with gas. When I was Energy Minister, I often emphasised the importance of energy security, which was very unfashionable then, as energy was plentiful and prices were low. I used to say that, if I or anyone else in that role became the Minister of Blackouts, it would be terminal in career terms. I would like to understand how much of a risk there is with gas now, and indeed how quickly top-ups could be accessed from the North Sea, if that is another possibility. In any event, I urge my noble friend Lord Callanan to make our gas supply less volatile, increase physical storage if possible and/or encourage allies like the Norwegians to do so as well.

--- Later in debate ---

[Lord Callanan (Con)]

I will leave that as a comment; there is nothing I can reply to on it. When I have further information, I will update the Committee.

The commitment proposed by my noble friend Lord Moylan to have in storage gas equivalent to 25% of forecast domestic consumption by 2025 is extremely ambitious. It is also horrendously expensive to do and, I submit to the Committee, unnecessary. The Government fully recognise the importance of gas storage, as I said, and officials continue to work on the future role that it can play in the clean energy landscape, particularly as gas production, as a number of noble Lords have said, can start to decline. But, of course, the fact that we get 45% of our production from our own continental shelf is, in effect, a giant gas storage facility and that is why we have traditionally had much less than continental countries which do not have those advantages. There is an integrated market—that is correct—and both sides benefit from it. As I said, the interconnectors over this year have been operating massively in the direction of the rest of continental Europe from the UK.

I think I have answered all the questions that were raised about gas storage facilities.

[Baroness McIntosh of Pickering (Con)]

I am sure it is on the departmental website, but do we know how much gas is supplied by interconnectors from Norway, and how much is supplied by tankers from Dubai and other countries in the overall scheme of things?

[Lord Callanan (Con)]

When my noble friend says “tankers”, I take it she means LNG tankers. I forget the exact figure, but we get 45% from our own domestic capacity and about 3% to 4% through interconnectors, so I guess the rest will be made up from LNG shipments. We have three LNG gasification terminals in the UK. Those figures are off the top of my head; I will correct them if they are not right.

Turning to the amendment in the name of the noble Lord, Lord Foster, I am sure he expects the reply that he is going to get. As he will be well aware, changes to tax policy are considered as part of the Budget process. As Treasury officials are always very keen to tell me whenever I put forward such proposals, they have lots of proposals from people for exemptions from various taxes but not many proposals for how to make up the revenue that would be lost from them. I am sure that the Chancellor will want to take that fully into consideration in the context of the Government’s wider fiscal position. I fully take on board the points that the noble Lord made. The Government keep all taxes under review and always, the Treasury tells me, welcome representations to help inform future decisions on tax policy.

Energy Bill [HL]

Baroness McIntosh of Pickering Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

[Lord Moylan (Con)]

My Lords, I rise to speak to Amendment 5 in my name, and thank the noble Lord, Lord West of Spithead, and my noble friend Lord Frost for their support, and to speak to Amendment 231, also in my name. Before doing so, I should say that since I joined your Lordships’ House, my entry in the register of interests has shown my membership of the advisory board of Stirling Infrastructure Partners, a relatively new corporate advisory boutique. Stirling Infrastructure seeks business with a wide array of major corporations, some engaged in the energy field, and it struck me after speaking at Second Reading that I should perhaps have specifically drawn the House’s attention to my registered interest at that point. I have not received any remuneration during my time on the advisory board, and I have since then terminated the interest.

I congratulate the noble Baroness, Lady Blake, and the noble Lord, Lord Lennie, for bringing forward Amendments 1 to 4 as a matter of general principle, because they are right that a Bill which seeks to articulate and implement our energy strategy, particularly our energy security strategy, should have a preamble that is strategic in character and should provide a setting so that we know where the Bill is heading and what it is trying to achieve. My difficulty with their amendments is that they are rather general in character and not entirely strategic. I hesitate to say this, conscious as I am that the noble Lord, Lord West of Spithead, may choose to speak, but simply aiming to win the war is not a strategy. A strategy requires something on resources, a plan and a general conception of how you are going to do it. If we are to achieve net zero, there are certain knotty issues that the Government need to be clear about so that we understand exactly what their strategy is at the level of detail appropriate to strategy. I, for one, am rather confused about the whole thing.

The purpose of my Amendment 5, which I have to admit is drafted in a rather convoluted way, for today’s debate is to elicit from my noble friend on the Front Bench some answers to three particular knotty questions. The first is the cost of net zero by 2050. One would have thought that we knew what the cost was going to be, but my understanding is that the only estimate the Government have had available to rely on was produced by the Climate Change Committee, which estimates that it will be in the order of 1% of GDP a year.

I do not have an objection to dedicating government expenditure on the basis of a certain percentage of GDP. If the Government want to say that they will spend 2% or some other percentage of GDP on defence, or they will spend 0.7% or 0.5% on international aid, for example, that is perfectly legitimate. But, of course, the figure of 1% a year from the Climate Change Committee is not of that character. We are pledging to spend not 1% a year but whatever it takes to deliver net zero by 2050, and 1% a year is an estimate. Moreover, it is an estimate that relies to a high degree on certain built-in assumptions, particularly that things are going to get cheaper—that the various inputs will fall in price over time. While that might be true of some, there is no reason to think it is going to be true of all. Part of the purpose of this amendment is therefore to call for the Government to commission an independent assessment of the cost of meeting net zero by 2050.

Then, we come to the question of affordability. Achieving it by a certain date—the date set in statute—doubtless has one cost attached to it. This amendment also calls on the Government to consider as part of that assessment what it would cost to achieve it. Would it be cheaper—more affordable—especially in the current crisis we are facing, if the terminal date were not 2050 but later? I put in two particular dates but if the Government choose others, I would be happy to go with those. The issue is the principle of whether achieving net zero over a longer period would be more affordable for the people of this country.

That is the first thing this amendment is trying to elicit the Government’s views on: do they have a reliable cost for achieving net zero by 2050, and would it be affordable if we took longer over it? As I said at Second Reading, bearing in mind that this country contributes a very small fraction of global emissions, the idea that achieving it by 2065 or 2050 will save the planet is simply self-delusion. We are doing this principally for exemplary purposes, rather than because of its practical effect.

Secondly, I do not wish to cause the slightest difficulty or embarrassment for my noble friend on the Front Bench, but I find the Government’s existing strategy, particularly the energy security strategy, the 10-point plan and so forth, rather weak in terms of strategic content and cost assessment. What are they going to cost? Also, implementation dates are largely lacking. We also need to know the relative contribution that each of the Government’s proposed measures will make to achieving net zero. Some might be very significant and others not, but we do not understand that from the documentation. That is the second purpose of this amendment. It is an important strategic question and I hope my noble friend will be able to say something about it.

The third point concerns the crucial issue, which I raised at Second Reading, of the intermittency of renewable sources. What do you do when the wind is not blowing or the sun is not shining? An obvious source to use to make up for that at the moment is gas, and that is largely what we do. Will we continue to use gas? That is one option. At Second Reading I quoted Professor Sir Dieter Helm saying that that makes the gas expensive in itself, because switching it on and off all the time is very inefficient and increases costs. However, is that the strategy? When I said that at Second Reading, the noble Baroness, Lady Bennett of Manor Castle, drew my attention to a recent report from a Finnish university that said that intermittency can be dealt with without recourse to gas. Afterwards, she kindly gave me a link to it, and I have studied it. The solution suggested—it is not unique to that university; it is fairly widespread—is that intermittency should be dealt with by way of battery power. When the wind is blowing and you do not need the electricity, you charge up the batteries, and when it stops blowing—it is the same for solar—you take the electricity out. That seems plausible at one level, and maybe it is the solution the Government are coming to; there is stuff about batteries in the Bill. However, it raises questions about the environmental consequences of extracting the minerals needed for the batteries, and about their disposal, siting and so forth. Can the Government tell us what role they see for batteries—if it is to be batteries; maybe it is not—in dealing with intermittency?

The third suggestion I have heard is that pumped water should be used. This involves using surplus electricity to pump water up so that, when you need it, it falls down again. I believe that some installations do that—indeed, one of them is hidden inside a mountain in Snowdonia—and that a couple are to be built in Scotland shortly. My understanding is that they produce very little power. They are an interesting idea. Is it the Government’s intention to roll them out at scale? What is the cost? Where are they to be sited? These are the things on which we should have some indication before we give the Government these powers. I note that there is stuff in the Bill on exactly this.

Finally, I have heard that we should use surplus power to produce hydrogen, but that assumes that there is a distribution network to take the hydrogen where it is needed when the wind is not blowing. So there are serious potential solutions to this problem. All of them have costs, both financial and environmental. Which do the Government prefer?

I have spoken quite long enough so I will come to Amendment 231 in my name, which asks a question that has been on many people’s lips over the past few weeks: how do we price wholesale electricity? At the moment, as I think noble Lords are aware, the price paid to generators is the price of the highest input needed to achieve the demand that exists in the system in a particular half-hour period. In recent weeks and months, that has become gas. Whatever they use to produce electricity—be it wind, solar or whatever—everybody is receiving the same price as for gas.

To be perfectly clear, though, not everybody is receiving the same price because many of those producers will have entered into a contract for the difference—a swap arrangement—with a government-owned company. Effectively, this means that they have a guaranteed price, and it does not matter what the price is in the pool. At the moment, this is something that the European Union is looking aggressively at in terms of whether it should be changed, whether we should have a different system and whether there should be two separate pools, with one for carbon and one for renewables.

These are all things that I would like to hear the Minister say something on. I sympathise with him because today is the last day of the current Administration. Tomorrow, there will be a new Prime Minister. It may be that the Minister does not have the answers to all these questions at his fingertips in the way we would all like to hear at the moment, so an answer in due course as Committee goes on would be extremely welcome.

[Baroness McIntosh of Pickering (Con)]

My Lords, I will speak to Amendment 6 in this group; I am grateful to the noble Lord, Lord Lennie, for his reference to it. It is intended as a probing amendment. I like to think that it is short and perfectly formed; I am grateful to the clerks for their assistance in drafting it. I remind the Committee that I am the president of National Energy Action. As the noble Lord, Lord Lennie, referred to, there are worries about households that have already fallen into fuel poverty and the strong likelihood that, by October this year or January next year, 1.5 million more households may be at risk.

Some further background to this amendment is my concern that most of the talk in the White Paper and the British energy security strategy from April, most of the talk in the recent leadership election campaign and most of the concentration of the press and media seem to focus on household fuel bills and the price cap relating to them. We must not lose sight of the impact of fuel and energy costs on small, medium and large businesses. Many have recently cited the instance of launderettes, which may not be big employers but serve a particularly useful function and are obviously highly intensive users of energy.

However, there are many others. In what was previously the Vale of York constituency, there is the York brick company, which has kilns to make its clay bricks on the go for probably two-thirds of each day—often over weekends, I imagine, if it is trying to complete an order. If we lose many such small and medium-sized companies, this especially will have a grave impact on the UK economy going forward.

Net Zero Strategy: High Court Ruling

Baroness McIntosh of Pickering Excerpts

Thursday 21st July 2022 Lords Chamber

[Lord Callanan (Con)]

I thank my noble friend for his recommendation for my holiday reading. I am not certain yet I will get a holiday, but if I do, I am sure his committee’s report will make fascinating reading—though I need no persuading of the importance of home energy efficiency and insulation schemes. We continue to progress work on just such a scheme, and I hope the new Prime Minister, when he or she comes into office, will support it.

[Baroness McIntosh of Pickering (Con)]

I will be taking the Energy Bill with me as my holiday reading. I congratulate my noble friend on the Statement he made and on having regard to the unprecedented energy circumstances in which we find ourselves and the challenges this poses for farmers and others. In support of the words of my noble friend Lord Howell, I ask my noble friend the Minister to increase the efforts of international co-operation to ensure that other countries are matching the efforts of this country and others in Europe.

[Lord Callanan (Con)]

My noble friend can be assured that we will do that. We make a relatively small contribution. We need to set the lead, but this is the epitome of an international problem, and all our efforts will be negated if other, bigger emitters do not reduce their emissions as well, so her point is correct and powerfully made.

Energy Bill [HL]

Baroness McIntosh of Pickering Excerpts

2nd reading
Tuesday 19th July 2022 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I am delighted to follow the noble Baroness, who speaks with great knowledge and great passion. I refer to my interests on the register, in particular that I am president of National Energy Action.

I take this opportunity to welcome what is a significant Bill, about which our expectations are extremely high. We are looking to achieve security of supply with stable prices against the backdrop of the implications arising from the war in Ukraine. Clearly, the impact on households, families and businesses has been considerable, so I particularly welcome the package of measures to which my noble friend referred in introducing the Bill this afternoon.

I take this opportunity to ask my noble friend to what extent the Bill will encompass not necessarily new sources of energy but sources of energy that I believe we have not developed to the extent that we should. I am thinking in particular of energy from waste. The reason why I am firmly committed to energy from waste is that it solves two problems in one go. It not only takes waste that would otherwise go to landfill—in many instances, these sites are now full—or that cannot be reused or recycled, but it creates a new source of energy at the same time. One successful example is in North Yorkshire, in the heart of my old constituency of the Vale of York, at Flaxby. In that case, the energy that was created was fed into the national grid, which I think is a mistake. I believe that it should be fed to the local community, to enable it to feel the benefits from this locally sourced energy.

I believe that, as others have suggested this afternoon, we should learn from other countries. I am particularly pleased that just this week the EU has signed a memorandum of understanding with Azerbaijan, securing a more stable gas supply than from other unreliable and less dependable sources—let us face it, that means Russia. Gas imports from Azerbaijan will be doubled to 20 billion cubic metres by 2027. That has to be extremely welcome.

Others have referred to Denmark—and, being half Danish, it would be remiss of me not to refer to Denmark too. Denmark was completely caught out in 1973, in the original oil crisis. It did not have natural sources of oil or gas to the extent that Norway and other states did, but it turned that around in a short period and now relies almost totally on renewables, including distance warming and energy from waste. In Denmark, the local community benefits from the reduced cost of heating, energy and hot water in their homes. I believe that that immediately makes the community accept what in this country there can be huge resistance to, such as a chimney being part of a facility, as I found out to my cost.

I would like to take this opportunity to ask my noble friend the Minister a number of questions that arise from a first reading—on this occasion, a Second Reading—of the Bill, if I may. He referred to the part of the Bill that talks about offshore wind. What research has been done on the impact of offshore wind farms on marine mammals and wildlife? In its latter days, the Energy and Environment Sub-Committee took evidence in which we heard various academics state that they estimated the damage to marine mammals and wildlife to be considerable. I suggest that, before we consider having any further offshore wind farms, we consider what research lends itself to the damage that can be done.

I take issue with what the noble Baroness, Lady Hayman, said with regard to onshore wind farms. One of the dangers of both offshore and onshore wind farms that we are not necessarily told about when planning permission is first sought—I hope that, on a different occasion, there will be an opportunity to amend this in the levelling-up Bill—is that, once an offshore farm reaches shore and when an onshore farm is onshore, each relies on ghastly overhead wires and pylons to transmit the electricity to the national grid or, in the case of North Yorkshire, to some distant southern part. We must accept that 30% of the electricity is lost in transmission; it is utterly wasted. We have to look carefully at why we still rely on the overhead transmission of electricity. I remind your Lordships of the damage caused by Storm Arwen, when thousands of houses lost their electricity—for six days in some cases—last autumn. To a large extent, that was because we in the north are completely dependent on transmission via overheard wires.

On the role of Ofgem, my noble friend the Minister referred to it being appointed to regulate the heat networks. For what reason does the Bill not give heat network customers equal market protections as would apply to gas and electricity customers? For example, the Bill should include a price cap and rules to regulate customers fairly to ensure that debt is collected at a rate that is affordable to customers. If it is in the Bill and I have missed it, perhaps my noble friend could explain to me where it is.

As I am sure all noble Lords have, I have received a number of helpful briefings for this afternoon. I refer to one of them, from the Association of Convenience Stores. It points to the part of the Bill—Part 10, I think—on fuel retailers without a wetstock management system. Can my noble friend the Minister confirm that they will be requested to provide information on their fuel stock levels only in emergency circumstances? I remind him that the association includes more than 7,000 convenience stores that trade from fuel sites, which provide 88,000 jobs across the UK.

I also want to look at how the Bill seeks to empower the raising of new levies on customer bills, in particular the new levy on gas bills to fund hydrogen. Will my noble friend give the House an assurance today that these new costs will not be put on the standing charge? As he will recall from the statutory instrument that we debated in Grand Committee last week, I believe that standing charges have already been increased by too high a level and that any further increase should be seriously considered before being imposed on a standing charge.

I am delighted to see that Ofgem has raised an investigation into potentially unjustified increases in the direct debits of households by six energy companies. I am struggling to think which the other companies are—I thought we were down to about six major energy companies—so I look forward to the outcome of that investigation with great interest. With those few remarks and those few questions, I give the Bill, for the most part, a very warm welcome this afternoon.

--- Later in debate ---

[Baroness Jones of Moulsecoomb (GP)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Boycott. I agree with everything she said. My noble friend Lady Bennett of Manor Castle suggested that I would sum up other people, but she has done a better job of it than I could, so I am just going to rant about the Bill.

The Minister said in his opening remarks something about the weather. Of course, this is an extraordinary day for us to be debating this Energy Bill. The temperature when I came into the Chamber was 40.2 degrees at Heathrow, and it is quite possibly higher now. It is highest UK temperature ever recorded, and possibly not the highest this year or in many years to come. The roads are melting, outdoor workers cannot do their jobs and London is on fire. I do not know whether the Minister has seen pictures of the fires in London that the fire brigade is tackling at the moment.

Then there are the buses that our Prime Minister, Boris Johnson, put on the roads, which I said at the time were inadequate. They have terrible ventilation, and now they are stifling ovens. I invite noble Lords opposite to go and test one today and see what they think about them. They will find them extremely unpleasant.

Yesterday, the High Court ruled that, as many of us have said for so long, the Government’s climate plans are barely worth the paper they are written on. The High Court ruled that the strategy was “inadequate and unlawful”. That is quite strong language. What were the Tory leadership hopefuls promising until Alok Sharma, bless him, forced them to acknowledge previous government commitments? They were promising to rip up our net-zero targets so that we can cut taxes for the rich. It is incredible that they think that that will win them the general election at some point.

Clearly, the 2050 net-zero target is too little too late to keep the 1.5 degrees centigrade goal alive, and even then, the Government look set to miss it. The Bill could have been an opportunity to correct course and get the country on track to meet the targets, but the Government miss the mark again and again. We must limit our greenhouse gas emissions to no more than the UK’s proportionate share of the global carbon budget. This emissions reduction has to be done as rapidly as possible. Yes, there are costs, but they are nothing compared to the costs of inaction and delay.

This transition must include an end to exploration, extraction and the trade in fossil fuels. As other noble Lords have mentioned, the Government talk of gas as a transition fuel. Although I reject this argument, if the Government truly believe it, they should put this transition status in the Bill, with a legally binding pathway to phase out gas entirely. However, they have plans for new UK oil, gas and even coal extraction. None of this is sustainable; none of it is transitionary. It is all damaging, destructive, and dooms any hope of keeping 1.5 alive.

Then there is the other energy source that is described as a panacea, as the future: nuclear. We hear of small nuclear reactors, thorium reactors, nuclear fusion; a never-ending wish list of science-fiction solutions to the very real crises that we face. I call it science fiction; my noble friend called it magical maths—I think I prefer that. Magical maths: that is what the Government keep trying to do. Of course, as with magic, it is not real—let us face it. Today we heard about “jet zero”. I give it 10 out of 10 for the label, but minus 10 out of 10 for the concept of making aviation net zero.

The noble Baroness, Lady McIntosh, mentioned energy from waste. I am sympathetic to that, but we have found that when we have incinerators, recycling rates go down. The councils have a commitment to deliver a certain amount of waste to the incinerator companies, but they cannot supply all that waste because people are reducing—

[Baroness McIntosh of Pickering (Con)]

My Lords—

[Baroness Jones of Moulsecoomb (GP)]

I will not take any interventions. I am so sorry; we are all tired and we want to get going, but I am happy to chat to the noble Baroness outside.

Perhaps the most objectionable part of the Bill is the Government’s quiet plan to bury nuclear waste under the sea—it is not quiet any more, of course. It is yet another example of passing on the burden of our terrible decisions to future generations. We will not solve the climate crisis by passing on a nuclear waste crisis instead.

As other noble Lords have said, insulation and energy efficiency are key to solving the crisis by significantly reducing our energy usage, but what does the Bill provide? A new energy performance certificate and a power—not even a duty—to make regulations about the energy efficiency of new buildings. It is inexcusable that new buildings are not meeting the very highest standards of energy efficiency.

One of this Government’s worst legacies will be the hundreds of thousands of leaky new-build homes that were built in the years since they scrapped the zero-carbon homes policy in 2015. Since then, we have had five years of inadequate homes being built, almost all of which will require expensive retrofitting as a result of this Government’s short-sightedness. This legislation should fix that mess, ensure that all new-build homes are zero carbon and set out a workable plan for deep retrofit of the entire UK housing stock, beginning with the communities that are struggling most in this cost-of-living crisis.

The Bill also misses the crucial role that local authorities and community energy must play in reaching net zero. Local government can be unleashed with new powers, new duties and the corresponding funding and fundraising ability to deliver. When the Minister comes back at Committee, will he table an amendment on community energy schemes? We can actually encourage people to go from “not in my backyard” to “let’s have it in our area”. That is a direct request to the Minister. It would be a real gesture of understanding what we need for the future.

The Bill has also missed the opportunity to align the UK’s emissions reductions target and strategy to the all-important 1.5 degrees centigrade threshold. Also, as others have mentioned, there is another catastrophic legacy from David Cameron’s tenure as Prime Minister: the whole issue of onshore wind. Perhaps the Minister could also table an amendment on that as a gesture towards all those in this House who care so much about that issue.

Of course, the Energy Bill should also ensure that any proposed solutions to the climate crisis as far as possible minimise damage to ecosystems, food and water availability and human health. I do not believe for one minute that this Government can rise to that challenge—but I live in hope—and nor, it seems, does the High Court.

Your Lordships’ House will work diligently, spending countless hours through countless days improving this legislation; then the Government will take it down the Corridor, as they always do, to undo all our hard work, whipping their MPs to do the wrong thing, no matter how obviously wrong it is. It is deeply disheartening and I can only plead to your Lordships that we put our collective foot down and insist on a realistic pathway to achieve that net-zero climate target.

However, luckily for the Government, who seem short of ideas at the moment, there are two Private Members’ Bills going through Parliament at this very moment that will fix their problem and fix it for the rest of us. They supply all the ideas necessary to actually get towards a carbon-neutral future. There is the Climate and Ecology Bill, which would make up for the gaps in the Energy Bill and ensure that the UK plays its full role in the global effort towards achieving 1.5 degrees centigrade, with its science-led target that we emit no more than our fair share of the remaining global carbon budget. It addresses the full extent of the climate and nature crisis, in line with the most up-to-date science. It will ensure a comprehensive and joined up approach. The Bill was written by scientists, experts and campaigners, was first introduced in Parliament by Caroline Lucas MP in September 2020 and has just been introduced in this House by the noble Lord, Lord Redesdale, who is not in his place.

Energy: Prices and Supply

Baroness McIntosh of Pickering Excerpts

Thursday 14th July 2022 Lords Chamber

[Lord Callanan (Con)]

The noble Viscount makes a good point. The Prime Minister and my noble friend Lord Grimstone visited the UAE and Saudi Arabia on 15 and 16 March. They met leaders of both countries and had some extremely productive discussions about collaboration and the importance of maintaining energy security and working together to help the green transition.

[Baroness McIntosh of Pickering (Con)]

My Lords, I declare my interests in respect of National Energy Action.

I welcome Ofgem’s ruling that overpayments of grossly inflated direct debits will be rectified. However, does my noble friend not question why the standing charge on each household bill has increased by up to 50%, given that this goes to distributors whose costs have not increased to the same extent as those of electricity suppliers? Should this not be urgently investigated?

[Lord Callanan (Con)]

Ofgem does look very closely at connection cost standard charges and direct fuel costs. Funding the transition from a big node-type power supply to lots of more diverse, renewable sources of energy requires considerable investment in our transmission system. In order to expand the use of electric cars, heat pumps et cetera, we must reinforce the electricity supply system, which of course needs to be paid for.

Electricity and Gas (Energy Company Obligation) Order 2022

Baroness McIntosh of Pickering Excerpts

Tuesday 12th July 2022 Grand Committee

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank my noble friend for bringing forward the order. I understand that there has been quite a delay, as the legislation was due to have legal effect on 1 April. I wonder why there was a delay, but I am delighted to see the order before us this afternoon. I remind the Committee of my interest as president of National Energy Action, which briefed me in advance.

First, I welcome the fact that the spending envelope is going to be much greater than previously. I understand that it has been increased from £660 million to £1 billion a year, which is quite a sizeable increase and makes the scheme much more ambitious. As my noble friend said, it is a fabric-first, multi-measure approach to upgrading homes. The scheme is better targeted and allows local authority suppliers and others to qualify households into it. I regret that, as I understand it, during the delay from 1 April until when this finally comes into effect—my noble friend can tell us when exactly—25,000 households could have benefited, so it is important that we get the statute adopted as soon as possible.

I would like to raise a couple of concerns. The practice of allowing households to make financial contributions towards the measures continues but, if a household is in extreme fuel poverty, how is it expected to find the resources to contribute, given that we are soon to be living in the worst fuel poverty that I can remember? I pay tribute to Martin Lewis, who I think has done consumers and households a great service generally in guiding people towards the schemes and explaining how all of us can save money as October approaches. Perhaps this is not the best day to be discussing this, given the temperatures today.

I would like to clarify why the scheme does not set an adequate minimum of solid wall properties to be treated. I wonder if there was a particular reason for this. The figures that I have are that over 90% homes with solid walls still need to be insulated to meet fuel poverty commitments, at the same time as delivering net zero. We are probably talking about a million fuel- poor households living in solid wall properties with no insulation—some of the worst-insulated houses not just in Britain but probably in the northern hemisphere.

There is a gap in the provision of energy advice that perhaps has not been met by the scheme. How does my noble friend expect to reach the fuel poverty targets at the same time as delivering net zero if we do not have a more comprehensive network of advice provision? While the proposed defined roles of retrofit adviser, retrofit assessor and retrofit co-ordinator will ensure that households are advised initially of the options, we need to ensure that homes are assessed properly and that there is a proper plan for improvement and evaluation. Is there a case that the advice should go further and include information on other available energy schemes and support?

At the moment, it is not entirely clear whether advice is accessible. I seek assurances from my noble friend that any information comes in multiple formats, because not everyone has access to the internet, not everyone has English as a first language, and there are obviously a variety of disabilities to deal with.

With those few concerns, which I hope my noble friend will address, I give a warm welcome to the instrument before us.

[Lord Whitty (Lab)]

My Lords, the noble Baroness, Lady McIntosh, has anticipated me, which is completely understandable since I am a vice-president of the same organisation, but I would like to put this in a slightly broader context.

The other day, when we were having an exchange at Questions, the Minister admonished me for apparently disparaging the ECO scheme. My point is not that the scheme is not desirable. It is a means of delivery that has proved its worth in certain respects. Certainly, the energy companies have now developed systems that identify where they could intervene with their own customers. However, inevitably, by relying entirely on the ECO scheme to deliver energy efficiency provisions, people get missed out. I have always argued that putting the responsibility on the companies as the main means of delivery means that there will always be gaps, because the companies will prioritise in relation to their own consumers. What we really need, have needed for some time and, in the current circumstances, need even more is a scheme that helps absolutely everybody who is fuel poor or likely to be made fuel poor, of which there are now more because of the current energy crisis.

Energy efficiency measures meet a lot of the Government’s and the country’s objectives of saving energy, moving away from fossil fuels, working towards net-zero targets, and off-setting the energy dimension of the cost of living crisis. We therefore need to strengthen them. I assure the Minister that I approve of the direction in which these regulations move, because they broaden the way you can bring people in. They increase the schemes and the comprehensiveness by looking at multi-measures in a way that past interventions frequently have not. This means that schemes can be addressed that do not rely on mini-interventions but look at the total fabric of the house and the systems by which it is currently heated. The detailed measures on the upgrading of the ratings are also important, and the broadening of the people who can refer into the scheme, particularly via the health service dimension, is also much to be welcomed.

As the noble Baroness said, there are some gaps. The biggest, which is not a gap but an inadequacy, is the failure to set a really strong target for solid wall insulation. The danger is that we do not have the companies and contractors to do that, because the regulations do not imply sufficient jobs and there is not the training for installers that is needed to deliver the aspirations. In terms of where we are on home energy efficiency, that is probably the biggest single inadequacy of delivery so far and it needs to be addressed.

I echo the noble Baroness’s point about advice, because a lot of the fuel poor, or those who are increasingly in danger of becoming fuel poor, do not have adequate advice in this area. The kind of advice they need overlaps with the advice needed by people in the hitherto so-called “able to pay” category. The failure of the successive schemes to deliver effective support for the “able to pay” sector really underlines the need to upgrade the whole of the advice in this area. The information is still inadequate and difficult to access for both the fuel poor and those who perhaps can still make a contribution themselves, and in some cases pay for the whole lot themselves.

In general, I think this order is in the right direction for the delivery of the ECO scheme but needs to be put into a broader context. That broader context becomes more difficult, because in the next few years we are about to decide what the main form of home heating in this country will be. Individual householders and landlords have to face decisions on insultation, whatever the form of heating. It is not yet clear whether we will still have something approaching the gas network or whether gas will be replaced by a hydrogen blend or by hydrogen. The number of properties is not clear. Many properties do not qualify or are not appropriate for heat pumps in their present form. There will be some difficult decisions on how they address that. Most households would prefer to know what the totality of their movement is, whether they are fuel poor or in the “able to pay” sector. They would like to know that they can perhaps insulate up front and then change to a different form of heating, or at least that they will not have to change everything in their house twice and that, whether they go under the ECO or a scheme where they pay themselves, they will not then have to adapt all their appliances and network again in two, three, four or five years because we have changed the form of heating.

We need a more strategic approach to this, but I assure the Minister that, as far as it goes, I am in favour of what he is proposing to us today.

Warm Home Discount (England and Wales) Regulations 2022

Baroness McIntosh of Pickering Excerpts

Monday 20th June 2022 Grand 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 12 May.

For 11 years, the warm home discount scheme has ensured much-needed support to millions of households. Since it began, it has provided more than £3.3 billion in direct assistance to households. Primarily, this support has taken the form of direct rebates off household energy bills.

The Government committed in the 2020 energy White Paper to extend and expand the scheme and to reform it better to target households in fuel poverty. These regulations provide for that expanded and reformed warm home discount scheme in England and Wales. Under the regulations, the scheme is set to last until 2026. The regulations succeed the previous warm home discount regulations in England and Wales. The Government will lay separate regulations for an expanded warm home discount scheme in Scotland, which will be debated separately.

The regulations have six main provisions. First, the expanded annual spending envelope is set in the regulations. For winter 2022-23, the spending envelope is £474 million, rising each year thereafter. Secondly, participating energy suppliers will be obligated to provide rebates directly off the energy bills of fuel-poor households. The value of the rebates for households is set at £150—an increase of £10. This means that around 2.8 million households will receive a rebate every winter. Thirdly, the scheme will continue to provide rebates to pensioners on the lowest incomes—those in receipt of the guarantee credit element of pension credit. This “core group 1” of eligible pensioners, as it is known, has been a key feature of the scheme throughout its existence.

Fourthly, there will no longer be a “broader group” of other low-income and vulnerable households. Under the former scheme, this group was required to apply to their supplier every year for a rebate. Even if eligible, these households were not guaranteed to receive a rebate, and the criteria varied by supplier. The Government are therefore creating a “core group 2” of households on the lowest incomes and with the highest energy costs. Eligible households will be those in receipt of one of the qualifying means-tested benefits or tax credits and meeting a high energy cost threshold. These households will be identified through data matching using benefits data, property characteristics data and energy supplier customer data. The Government intend to publish a statement setting out the exact details of the eligibility, including the high-cost threshold.

Fifthly, these regulations make it mandatory for suppliers to contribute to Industry Initiatives. Industry Initiatives allow suppliers to fund other financial and energy-related measures such as financial assistance payments, debt write-off, benefit entitlement checks, energy advice and energy efficiency measures. Industry Initiatives will be set at £40 million for this winter and rise each year thereafter. The regulations also set minimum obligations and caps regarding financial assistance. This recognises the value that they provide, while ensuring that other high-value Industry Initiatives measures still receive funding.

In addition, the Government are maintaining aggregate and household-level caps on debt write-off to avoid this measure being misused to reduce bad debt. The last Industry Initiatives restriction is to limit the number of mains gas-powered boilers and central heating systems that can be installed. These will still be permitted to support particularly vulnerable customers during emergencies but will be restricted to align with the heat and buildings strategy.

Sixthly, and finally, the regulations set the thresholds for suppliers participating in the scheme. The Government are lowering the thresholds so that more suppliers participate, and to reduce the barriers to customers switching suppliers. In 2022-23, the threshold will be set at 50,000 domestic customer accounts; from 2023-24, it will be set at 1,000 accounts. This means that 99.9% of the market is covered.

The Government are expanding the scheme to provide rebates to 750,000 more households. Thanks to these reforms, the vast majority of eligible households will receive their rebates automatically, without having to apply. A small minority will be contacted and required to contact a helpline to confirm their details.

The Government’s analysis shows that, by focusing support on households on the lowest incomes, the fuel poverty targeting rate will increase to 47% overall and 560,000 more fuel-poor households will receive a rebate compared with an unreformed scheme.

The Government held a consultation on these reforms last summer and we published our response in April. The consultation responses supported extending and expanding the scheme as well as proposals for reform. The Government are proceeding with the main proposals; however, we decided to make a number of changes in light of the consultation responses. We have added housing benefit to the list of qualifying benefits, and tax credits in the eligibility criteria for core group 2. Energy suppliers will be required to provide estimates of the value and proportion of spending under industry initiatives in relation to households where a person has a disability or a health condition. This will enable the Government to monitor the level of support provided to disabled customers. The Government have removed the proposed mid-year adjustment to the Industry Initiatives budget. This risked creating significant uncertainty and delivery risks. Lastly, the Government are keeping the overall debt write-off cap under Industry Initiatives at £6 million per year.

The warm home discount remains a source of critical support for many low-income households. The regulations extend this scheme, expand the support to more households and focus that support on those most in need. I therefore commend these regulations to the Committee.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate and thank my noble friend for presenting the regulations before us, which I warmly welcome. I set out my interest on the register, as president of National Energy Action, and raise some of its concerns about these regulations—or rather, what is not in the regulations—with my noble friend and ask for his positive response.

First, I point out that the regulations were drafted at a time when the scheme was very successful, prior to the Covid crisis. I will come on to that in a moment. My first concern is that the way of selecting core group 2, to which my noble friend referred, is potentially unfair. While National Energy Action supports the guiding principle that the Government should help the worst first, the proposed methodology creates a significant risk that some households that are currently eligible for support and live on the lowest incomes could miss out on rebates, if they are falsely estimated to have lower energy costs. The new core group 2 methodology also means that you cannot access a rebate without receiving a means-tested benefit. What happens to the 50% of fuel-poor households that do not currently receive such a benefit? Have the Government considered what will happen in those circumstances?

If a household is not selected as part of core group 2 but should have been, it seems very difficult to contest the decision. The customer journey is not particularly user-friendly. How does my noble friend expect to resolve issues arising from that circumstance? National Energy Action is not convinced that the funding available through Industry Initiatives is sufficient to meet the expected demand. The way that funding has been allocated for Industry Initiatives means there is significant uncertainty about the total available pot each year. The first year of the scheme could see a reduction in funding compared to 2021-22, which does not seem sensible given the energy crisis and is surely not what the Government envisage happening.

The department has still not made amendments to the scheme to ensure that, if and when there is a supplier failure, the supplier of last resort takes on the full obligation of the failed supplier. This means that there is a risk that some obligation can be lost through the process, so that the overall number of rebates is reduced and projects that have been committed to go through industry initiatives actually go unfunded. Then, there is the significant issue that I raised earlier: the scheme was designed for good times and against that background; it was not put together with an energy crisis in mind. Although it is too late to go back to the drawing board now on the warm home discount, could not the Government look at what additional protections are necessary? Given that the Treasury has agreed one-off payments this winter, and that the crisis will outlast that support, something extra might be necessary against that background.

National Energy Action would therefore like to propose a number of things that it believes the Government could do to overcome this. One is to investigate deeper price protection or a new social tariff, which I have raised with my noble friend before. This would make energy more affordable for a discrete and well-defined set of low-income energy customers. Such a tariff must be additional to existing schemes, mandatory for all suppliers, targeted at those most in need, reduce the costs of eligible households and use auto-enrolment. It might need primary or secondary legislation so that it could sit alongside the price cap.

Secondly, will the Government consider accelerating the repayment of utility debts across the UK? This would provide financial support for households that have a debt repayment plan with their energy supplier, with government matching every pound paid by the customer with £1 of Treasury funding. This would help every indebted household, but it would cost £500 million per year.

A further proposal is accelerating the improvement of energy efficiency through three possible methods, the first of which is prioritising parliamentary time for the passage of ECO4 legislation. The second is committing the remainder of the funding promised in the Conservative Party manifesto for upgrading fuel-poor homes. Apparently, the Government have committed only £1.1 billion of the promised £2.5 billion for the home upgrade grant scheme. Committing the remainder would help more than 100,000 households to save more than £750 a year on their energy bills. The third method is setting regulatory minimum energy efficiency standards for rented properties. This would help those in the private rented sector, which has some of the leakiest housing in the UK. Despite winter temperatures being as low as they are, we probably have some of the most poorly insulated housing in the whole of northern Europe.

Finally, I would like to raise the issue of the role of the regulator, which has probably not costed in, in general, the failures of existing energy companies over this past year. Will the department consider a number of measures, such as reducing the standing charge for pre-payment users by recovering SOLR costs on a volumetric basis, and better identifying and acting on the financial vulnerability of energy consumers? Will they ensure that the costs of failed suppliers are spread over a longer period, to reduce the immediate burden on consumers? Will they reduce the wider burden of energy debt on consumers by enforcing licence obligations? Finally, will they work to ensure that all prepayment users can receive a smart meter as a priority, and perhaps have a more general debate on what the role of the regulator in this market should be?

With those specific comments, which I hope my noble friend will look on favourably, I give a warm welcome to the regulations before us.

--- Later in debate ---

[Lord Callanan (Con)]

Yes, of course we will conduct a process of constant improvement. As more data become available, as universal credit is rolled out, and as EPCs are increasingly rolled out and more properties have one, it will make targeting easier. We will modify the scheme as we go forward, using new and improved targeting data.

I thank noble Lords for the useful points they made. I am pleased that virtually everyone who spoke was in broad agreement that the scheme should continue at this time because it has been very successful at providing householders on the lowest incomes with critical support.

[Baroness McIntosh of Pickering (Con)]

Before my noble friend takes his seat, there seems to be a discrepancy in the figures. My noble friend said that 69% of the fuel poor are in receipt of means testing, which means that 31% are not. The NEA said 50%. I would be interested to know, however many there are, how those who are not in receipt of the means-tested benefit under core group 2 will qualify. Is it the Government’s intention to commit all the funds that were highlighted in our manifesto at the last election?

[Lord Callanan (Con)]

My noble friend has asked me a number of difficult questions. Yes, we want to ensure that as much of the funding as possible is committed to this scheme, perhaps all of it will be. I am not sure what my noble friend is referring to by the funds we promised in our manifesto. Is she referring to energy efficiency? In that case, the majority have already been allocated.

On the targeting of those in fuel poverty, I default to the information that I have been given as opposed to the NEA figures, but if there is a mistake in those numbers, I will write to my noble friend.

Construction Contracts (England) Exclusion Order 2022

Baroness McIntosh of Pickering Excerpts

Monday 13th June 2022 Grand Committee

[Lord Callanan (Con)]

Yes—very good. There is a pipeline of potential projects that could adopt this model, and the Government believe that its use will deliver benefits to consumers. Through increasing competition in the delivery of strategic infrastructure, it will ensure that the cost of this infrastructure is market tested and therefore fair for water and sewerage customers. I apologise for the complicated nature of the explanation and I commend this instrument to the House.

[Baroness McIntosh of Pickering (Con)]

I am sure that we are all very grateful to my noble friend for presenting this document. I am sure that he will be aware of the vexed issue of sustainable drainage systems—SUDS—in relation to the provision of water and sewerage services. So I ask very specifically whether the implementation of SUDS will be affected and enhanced by the exclusion in this regulation.

Paragraph 7.3 of the Explanatory Memorandum says:

“The instrument is limited to a specific procurement model for high value infrastructure assets in the regulated water and sewerage sector ... There are two projects under active development and a further 18 strategic water resource schemes are being progressed ... across the next 2-3 price review periods”—


so we are looking at a period of 15 years. As we are told that the significance and the business impact of this is estimated at £54,000, how will this enhance the ability to introduce SUDS and other larger water infrastructure projects if it is such small beer? That is the only issue that I will raise; otherwise, obviously I approve this instrument.

Fuel Poverty

Baroness McIntosh of Pickering Excerpts

Monday 13th June 2022 Lords Chamber

Asked by

[Baroness McIntosh of Pickering]

To ask Her Majesty’s Government what assessment they have made of the numbers of households in fuel poverty; and what steps they are taking to address this.

[Baroness McIntosh of Pickering (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I refer to my interest in the register as president of National Energy Action.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, in our latest official projection, there would be an estimated 3.03 million households in England in fuel poverty in 2022, according to the low-income, low-energy efficiency definition. The Sustainable Warmth strategy, published in February 2021, details our approach to tackling fuel poverty in England. Energy efficiency remains the best way to tackle fuel poverty in the long term, reducing the amount of energy required to heat a home and contributing to lower energy bills and of course, carbon emissions.

[Baroness McIntosh of Pickering (Con)]

I thank my noble friend for that Answer. The figure used by the NEA is 6.5 million households in fuel poverty. Of course, that figure would have been substantially higher had it not been for the generous measures given by the Government in late May of this year. Does my noble friend recognise that there is now another type of fuel poverty, and that is the fact that it is costing £100 to fill the tank of an average family car? In those circumstances, does he accept it is causing real hardship in rural areas, and particularly for carers travelling between their clients? Will the Government, as a matter of urgency, reduce the VAT of 20% on fuel and the 57% fuel duty and make sure that is passed on to the forecourts?

[Lord Callanan (Con)]

I totally understand the points that my noble friend is making, and the Chancellor has, of course, already reduced fuel duty. Domestic fuels, such as gas and electricity, are already subject to the reduced rate of 5% VAT. Going further, I would not guarantee that prices would fall, given that most of the price rises are driven by a number of factors that can be seen worldwide. The other problem is that cutting VAT would also be a tax cut for everyone, including wealthier people in society.

Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2022

Baroness McIntosh of Pickering Excerpts

Monday 23rd May 2022 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the Pollution Prevention and Control (Fees) (Miscellaneous Amendments) Regulations 2022 were laid before the House on 25 April 2022. I will refer to these regulations as the fees regulations.

As the environmental regulator of the offshore oil and gas sector, which I shall refer to as the offshore hydrocarbons sector, BEIS’s Offshore Petroleum Regulator for Environment and Decommissioning, which I shall refer to as OPRED, recoups the cost of its regulatory functions from the offshore hydrocarbons sector rather than the taxpayer footing the bill. OPRED minimises the impact of the offshore hydrocarbons sector on the environment by, for example, controlling air emissions and discharges to sea and minimising disturbance over the life cycle of operations, from seismic surveys to post-decommissioning monitoring.

Regulatory activities for which OPRED can recover costs are covered in two ways: within a suite of regulations that are covered by the fees regulations, and by five fees schemes which are not, as they do not require legislative change and will be amended administratively. OPRED’s annual fees income is on average £6.2 million, which is recovered from around 120 companies, which are billed quarterly. OPRED recovers its costs via fees based on hourly rates.

The fees regulations will revise the hourly rates used to calculate fees payable by the offshore hydrocarbons sector. The fees relate to the provision of regulatory functions in relation to the environmental management of offshore operations. Currently, the fees that OPRED charges for providing regulatory services are based on hourly rates of £197 for environmental specialists and £108 for non-specialists. Environmental specialists are qualified technical staff who carry out the legislative functions of the Secretary of State, and non-specialists are administrative staff who support them.

The current hourly rates have been in force since June 2021. OPRED reviewed the cost base and concluded that the existing hourly rates need revising to reflect the present costs to OPRED of providing specific regulatory services. The fees regulations will therefore amend the charging provisions by increasing the existing hourly rate for environmental specialists to £201 and decreasing the current hourly rate for non-specialists to £104. As the changes relate to cost recovery, they do not represent monetary changes linked to inflation.

OPRED’s fees are determined by adding together the recorded number of hours worked by environmental specialists and non-specialists on cost-recoverable activities, multiplied by the hourly rates. The new hourly rates were approved by Her Majesty’s Treasury in March 2022 and were calculated in line with the Treasury’s Managing Public Money guidance. They cover the expenditure on all resources used by OPRED to support cost-recoverable activities—for example, staff salaries, accommodation, IT and office services, and corporate services such as human resources, senior management, legal, finance and learning and development.

Guidance on OPRED’s fee-charging regimes is published and clearly explains the scope of the cost-recoverable functions undertaken by OPRED and how the costs are to be calculated and recovered. The cost-recoverable functions undertaken by OPRED include, for example: the evaluation of applications and issuing of consents for seismic surveys, and the conducting of appropriate assessments of the likely significant environmental effects of proposed projects; assessing and approving operators’ oil pollution emergency plans; and compliance monitoring activities, including offshore environmental inspections.

The fees to be paid will be revised by a small amount, sufficient only to allow OPRED to recover its eligible costs. OPRED’s guidance on its fee-charging regime will be revised to reflect the new hourly rates. Those who OPRED charge are aware that the hourly rates are reviewed annually. Although there was no statutory requirement to consult on the fees regulations, in April 2022 OPRED informed the offshore hydrocarbons sector of the planned revisions to the hourly rates, and no representations were received.

Therefore, I conclude by emphasising the importance of the revisions to the hourly rates being introduced by the fees regulations. The revisions will enable OPRED to recover the costs of providing regulatory services from those who benefit from them, instead of these costs being passed on to the taxpayer. The fees regulations will be debated by the House of Commons tomorrow, 24 May. I therefore commend the draft fees regulations to the House.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate my noble friend on bringing forward these regulations, which seem perfectly reasonable. I thank the environmental specialists and non-specialists for the crucial work they do in this sector.

I have just one small question to ask my noble friend, if I may. If you look at the same regulations from last year, we seem to be reversing the rate that was agreed for the non-specialist workforce. I think the rate was increased from £101 to £108 last year, so I would like to understand why the Government have decided to cut that back to £104.

My noble friend has just told us that there were no responses to the consultation, so one has to accept that no alarm was expressed by the non-specialist sector. For my greater understanding, can he explain what proportion of the workforce are environmental specialists, as opposed to non-specialists? Paragraph 7.3 of the Explanatory Memorandum states that

“the total amount to be recovered by OPRED in FY 2022/2023 will be broadly similar to the average received in previous years”.

On what assumption is that based? Is the increase in environmental specialists being covered by the reduction in the non-specialist sector in order to keep it within that envelope?

With those few remarks, I welcome the regulations before us.