Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022

Lord Hodgson of Astley Abbotts Excerpts

Tuesday 22nd November 2022 Grand Committee

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

My Lords, in moving that the Grand Committee do consider the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022, I shall speak also to the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022, and the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022, all of which were laid before the House on 31 October; and the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022; and the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022, laid before the House on 4 November.

Last Wednesday, I set out the details of the Government’s energy support schemes: the energy price guarantee, the energy bill relief scheme, or the EBRS, and the energy bills support scheme—the EBSS. I am in front of your Lordships today to explain the pass-through requirements in respect of these schemes.

The Government have responded rapidly to the unprecedented rise in energy prices by introducing emergency legislation on energy support. This support will protect homes and non-domestic consumers across the United Kingdom, so that families and consumers will be supported in their cost of living this winter. These pass-through requirements place a legal requirement on intermediaries to pass any benefits received through the various energy schemes to the end-user, thus ensuring that the support is received by the intended beneficiary.

These regulations have been created under the Energy Prices Act, which noble Lords will know received Royal Assent on 25 October 2022. They are essential secondary legislation to implement the energy schemes.

I am, of course, aware that the JCSI is still considering two of the instruments, and we will not move to approve them until that work has concluded. If that committee has any concerns, the Government will respond to them when we ask for approval, including time for debate if that is useful to the House.

I thank the Secondary Legislation Scrutiny Committee for its views on the pass-through requirements regulations. The committee raises three concerns: the definition of “just and reasonable”, inequality of arms, and vulnerable groups.

The committee’s first concern is that the meaning of “just and reasonable” is vague and open to interpretation. The pass-through regulations do not prescribe the exact method of the amount passed on by an intermediary. These requirements take into account the diverse range of contracting structures relating to the supply, resale, provision and charging of energy. We do not want any intermediaries to fall outside of the pass-through requirements by limiting the possible contracting scenarios through these regulations.

The definition of “just and reasonable” is long established in law. It essentially means what is fair and lawful under the circumstances. We believe that this would allow for the many different arrangements between an intermediary and end-user that these regulations are designed to police.

The committee’s second concern is inequality of arms: where a landlord who has multiple properties and receives all the energy schemes, and how they allocate the financial benefits received to their individual tenants. The regulations take this scenario into account. Where an intermediary receives energy support but has multiple end-users, they should determine a just and proportionate method of dividing the benefit among these end-users, and clearly communicate how they have arrived with the amount allocated to those end-users.

The committee’s final concern is the vulnerable groups affected by the pass-through regulations. We are keen to ensure that all end users, including those who are vulnerable, such as older people or people with disabilities, receive the benefits of the schemes where they are entitled to them. We have been delivering and building a communications campaign, which includes engaging with landlords, housing associations and charities, all of which protect those who are most vulnerable. Another statutory instrument will be laid later this month to correct some mistakes in the original heat supplier regulations.

The pass-through regulations ensure that the Government’s energy support reaches families and consumers. Rather than expecting intermediaries to act on their own accord, we are requiring that they pass on the financial benefit to their end users. 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 a pass-through of reductions attributable to that energy price support. The intermediary then passes on the costs of the 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. This also covers intermediaries supplying a product or service where, contractually, a component of the price relates directly to the use of energy or 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 energy price guarantee, the energy bills support scheme and the energy bill relief scheme, including customers who are part of heat networks.

If the intermediary does not pass on the benefit, the end user 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 due, 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 benefit. 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.

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 end users to benefit from the discounts they are entitled to in the scenarios where intermediaries are not meeting their legal obligations. I therefore commend the regulations to the Committee.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I am grateful to my noble friend for his explanation and for the way he has addressed some of the concerns of the Secondary Legislation Scrutiny Committee, which I chair. The SLSC, a cross-party committee, is of course not concerned with politics. That is for the House, the Government and, in due course, the electorate to decide.

My remarks now are therefore not about the energy policy but about the administration and process by which it is being delivered. We have quite narrow objectives in our terms of reference. The two that I think apply today are, first, that the instruments are

“politically or legally important and give rise to issues of public policy likely to be of interest to the House”;

and secondly, that they may imperfectly achieve their policy objectives. I particularly want to compare the unfavourable treatment of Statutory Instruments Nos. 1102, 1103 and 1125 with the other two in this group, Statutory Instruments Nos. 1101 and 1124. The first lot are about energy and the second lot are about heat.

As my noble friend the Minister has explained, this is about making sure that a fair share of the proceeds are passed on to tenants by landlords. He has gone through the rationale for “fair”, “reasonable” and so on and so forth, but it is worth while us putting ourselves in the position of an elderly widow. Let us say that she is in a block of 50 flats. Let us say that the landlord has two or three blocks of flats; they may have a couple of hundred tenants. The landlord may say, “Here is your rebate”. She may, for one reason or another, decide that it is not right. She must therefore begin proceedings to recover what she believes her fair and reasonable share is. That is what the committee was concerned about: inequality of arms.

We have to think about a single individual, maybe a vulnerable individual. I accept that I am exaggerating slightly to make a point, by taking one particular angle on the people who might be affected, but I am trying to explain to the Committee that this person is somehow going to have to have the courage, conviction, energy and money to take the landlord on and take them to the county court over what may not be a huge sum of money. Although I am sure my noble friend wishes to find ways of ensuring that tenants are informed and helped and that landlords are required to provide proper shares, records and so on, I am not sure that this is going to work in the real world as happily as the Government, I and the SLSC would wish it to. The inequality of arms—above all, in the power to delay and ask for more particulars; as I said, this should be looked at in a lot of detail—is likely to work in favour of landlords, particularly multiple landlords, against tenants, particularly tenants who are vulnerable, elderly or disadvantaged in one way or another.

When we come to the first three SIs, Nos. 1102, 1103 and 1125, there is no further appeal—that is the end—whereas when we get to Nos. 1101 and 1124, there is an appeal to the Energy Ombudsman and the General Consumer Council for Northern Ireland, in respect of activities in the Province. So, although I quite understand what the Government are doing and wish to do well, they will need to keep a very close eye on what is going on under these regulations to ensure that fairness is not only being sought but being achieved and that, in cases where people are less well equipped to fight their corner, they are properly protected and looked after.

[Lord Teverson (LD)]

My Lords, I would very much like to follow up on a number of the points that the noble Lord, Lord Hodgson, made so clearly. First, I welcome these regulations. Clearly, they are important pieces of secondary legislation. They are really important in terms of making sure that energy contributions, subsidies and public payments reach the people they need to reach. The questions I am going to ask are not a prosecution, if you like; I want to understand how some of this is going to work. I recognise fully the difficulty that the Government might have in finding a way to make this work.

First, what is the size of this problem? Does the Minister have any indication of the number of households that, in effect, have their landlords pay their electricity and energy bills? I do not know whether he has any idea what that is.

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I hope I have answered all the questions.

[Lord Hodgson of Astley Abbotts (Con)]

I am grateful to my noble friend for his very thorough answers. I might have misheard, but I do not think he said why there is an appeal procedure in respect of heat in Statutory Instruments Nos. 1101 and 1124 and not in respect of energy. Clearly, one of the things that answers the inequality of arms is an ombudsman who is there to step in if things go badly wrong. I was not quite clear why it was in one group and not the other.

[Lord Callanan (Con)]

The answer to my noble friend’s question is that there is already a regulator in place for heat networks, so it is appropriate to use the regulator. Unfortunately, for most of the other circumstances there is no regulator in place, which is why we have had to default to the court process. I totally accept his point about the inequality of arms. I am not unrealistic about the difficulties that many tenants and others will face in trying to enforce their rights under this, but all we can do is put the regulations in place, publicise them and make sure that people know their rights. We will keep the scheme under constant review. We will ensure that the payments are passed through and that people receive the benefit to which they are entitled. We will not hesitate to act further if there is widescale avoidance of this responsibility.