Energy Bill Relief Scheme and Energy Bills Discount Scheme (Amendment) Regulations 2024

Debate between Lord Hunt of Kings Heath and Baroness McIntosh of Pickering

Wednesday 12th February 2025 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, these regulations, which were laid before the House on 16 December 2024, amend two schemes created by the previous Government in response to the energy crisis.

The amendments address an issue that was not considered in the rush to get the schemes into operation but which has now come to the fore as the schemes have been brought to an end. The issue is technical: both the energy bill relief scheme and the energy bills discount scheme, which I shall refer to as EBRS and EBDS respectively, supported non-domestic energy users, including businesses and heat networks. EBRS supported energy bills from October 2022 to March 2023, while EBDS supported bills from April 2023 to March 2024. Both schemes operated on a “claim back” model, meaning that suppliers paid out the discount to their customers before recouping those costs from the department.

Scheme funds were paid out on estimated and actual meter readings. As actual meter readings are received by energy suppliers, they rebill their customers, replacing earlier estimated bills, and the discount paid out by the department becomes settled. The department calls this process “actualisation”. Suppliers then come back to government to recover additional discount they have paid out or to pay back any excess discount resulting from an initial overestimation of the energy. This is right: the intention behind the schemes has always been for government to fund the discount to the consumer and not the energy suppliers.

The regulations require the Secretary of State to determine when a supplier should leave the scheme, based on an assessment that there will be no further material amount owed from the department to a supplier or vice versa. One of the supporting criteria to make that assessment is that a supplier has billed customers on actual meter readings to a threshold of 95% of gas supplied and 97% of electricity supported under the scheme, wherever possible. Once a supplier has left the scheme, it is unable to claim back any further money from the department for discounts that it has paid out on behalf of the schemes.

However, as the regulations currently stand, suppliers are still required to pay out discounts on any newly billed energy supplied during the periods of either scheme, when this situation could arise through no fault of their own; for example, when customers have moved premises and failed to notify the supplier or have been tardy in allowing access to meter readers. This could result in suppliers funding government support without the ability to recoup these costs from the department. This is contrary to the intention of the schemes. As a result, suppliers have been reluctant to leave the schemes, which must come to an end in a timely manner.

The amendments in this statutory instrument remove the obligation on suppliers to provide the discounts to customers, except in instances where the consumer has lost out due to poor practices by their energy supplier. In these instances, we have provided carve-outs to balance the interests of suppliers with the support and protection of consumers.

The first consumer protection is, when a supplier is rebilling a customer, it must still apply the discount for energy which was previously billed before the discount duties, even if the newly calculated additional consumption is exempt. The second protection relates to unbilled customers. When a customer receives a bill that falls within the scheme period, a supplier would be required to pass on the appropriate discount if it has not previously provided that customer with a bill. This is to ensure that the original policy intent of providing consumer support is realised. The third and final consumer protection is when unreasonable delay, or another failure on the part of the energy supplier, has led to the energy not being billed accurately or at all when the discount duties applied. An example might be if the bill was sent unreasonably late after exit from the scheme, rather than before. In those circumstances, the customer should not and will not lose their entitlement to the discount.

There is still an obligation on suppliers to repay the Government any discount they have recovered; for example, if actual consumption was lower than the estimated consumption and a discount is clawed back. Should any dispute arise between suppliers and customers in relation to these carve-outs, the resolution mechanisms would be those normally used in the industry: via a complaint to the Energy Ombudsman, where available; investigation and potential sanction by the regulator; or court action.

The amendment applies to energy suppliers in Great Britain. Separately, the regulations also amend the Energy Prices Act 2022 to allow the devolved Administration in Northern Ireland to make amendments to address this issue in the Northern Ireland scheme. This is because their power to amend their equivalent legislation has expired.

In very limited circumstances, it is possible that a customer could lose out on some entitlement to discount. If a supplier had already exited the schemes and had underestimated a customer’s energy consumption, the customer would not receive the discount on the additional newly billed energy unless the supplier was at fault, as I have just described. Given that the vast majority of energy supported by the schemes is based on actual meter readings, we do not expect many customers to be in this position.

Furthermore, our analysis shows that suppliers tend to slightly overestimate and that customers reduced consumption during the energy crisis, switching off non- critical operations to reduce costs. None of the suppliers that have left the scheme to date, nor any of their customers, has reported this risk materialising. We expect and hope that this amendment will give suppliers confidence to exit the scheme without the risk of ongoing financial liability through no fault of their own.

Energy prices for non-domestic consumers have dropped following record peaks, but of course we recognise that they remain high and pose issues for some businesses. We believe that our mission to deliver clean power by 2030 is the best way to break our dependence on global fossil fuel markets and permanently protect bill payers, including non-domestic consumers. In the short term, the Government are taking action to better protect businesses from being locked into unfair and expensive energy contracts. Last year, the Government launched a consultation on introducing regulation of third-party intermediaries such as energy brokers. This is aimed at enhancing consumer protection, particularly for non-domestic consumers. The consultation has now closed, and a government response will follow in due course.

The Government are also empowering businesses to challenge unfair and poor service from their suppliers. Since December last year, SMEs with fewer than 50 employees or that meet energy consumption or financial thresholds can now access free support to resolve issues with their energy supplier through the Energy Ombudsman service. This expands the service to 99% of British businesses, allowing them to access up to £20,000 in financial awards.

I propose to the Committee that this is a very sensible statutory instrument dealing with some issues that have arisen. It follows on from the previous Government’s decision and is consistent with what they sought to do. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the Minister on the stamina he has shown over the last 48 hours. I welcome these regulations; had we remained in Government, I am sure that we would have done exactly the same—as was also said in the debate in the House of Commons.

The Minister alluded to the fact that energy prices are still quite high. I understand that within one of these regulations there is provision for an off-grid payment of £150. If that is the case, will his department look favourably on charities, public sector bodies such as schools and hospitals and, as he rightly mentioned, micro-businesses of under 15 employees—or even 50—so that they might remain eligible for that?

The noble Lord referred to unfair, and what I would call sharp, practices that are perhaps still going on. This is only anecdotal, and I cannot prove it, but there was a restaurant not too far from this building which I think partly closed and changed hands because they had an unbelievably high electricity bill in January last year, so I am delighted to hear that the Government have launched this consultation with a third party. It would be interesting to hear more about how those brokers might operate. What provision will be made to ensure that the brokers are reliable and able to operate within this sphere?

With that, I pay tribute to the previous Government for their work and the protection that was given to non-domestic customers, which was very welcome at the time. I recognise that we are still in a period of high energy prices and, with those few questions, I wish the SI a safe passage.

[Lord Offord of Garvel (Con)]

My Lords, I commend the Minister for a pretty spectacular explanation of what is quite a complicated and technical exercise. These schemes were introduced, as was said, between October 2022 and March 2024 and, as we know, they gave much-needed assistance to non-domestic customers. We are dealing now with a small yet significant minority of consumers who have not received their finalised bills, due to ongoing delays in the actualisation process. My understanding is that these delays arise mostly from the use of estimated rather than actual meter readings, but they have created significant complexities for both suppliers and consumers, especially when one of the issues around this is the concept that the supplier can become “off-boarded” when they hit the actualisation thresholds, as mentioned by the Minister, of 95% for billed gas and 97% for billed electricity, which means they are no longer required to apply further discounts.

We agree that this is a legacy issue that needs to be dealt with. Our only issue—I am sure that the department is working on this—is the need to deal with unintended consequences, such as where a supplier is off-boarded but still has unbilled energy due to these administrative delays. The amendment allows for discounts to continue only in cases where a billing failure has occurred, but does that provide sufficient protection to the consumer if the errors are on the supplier’s part, for example?

Further issues might be that the amendment extends the rule limiting discounts on variable price contracts. Discounts can only be reduced, not increased, post off-boarding. Does that sufficiently accommodate fluctuations in wholesale energy prices that suppliers may face? Does it risk creating an imbalance in terms of supplier and consumer rights? Then there is the issue of disputes. While the original scheme allowed for disputes to be referred to the Secretary of State—a horrendous concept—the amendment seeks to close that avenue. I am sure that the department is all over this, but we need to ensure that, in the technicalities of actually making this happen, we get a fair balance between supplier and consumer rights. Otherwise, we support the passage of this SI.

Great British Energy Bill

Debate between Lord Hunt of Kings Heath and Baroness McIntosh of Pickering

Report stage
Tuesday 11th February 2025 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I shall speak to my Amendment 40. I am rather disappointed that the Minister did not refer to the other amendments in this group.

[Lord Hunt of Kings Heath (Lab)]

With great respect, my Lords, I think the form is that I move my own amendment and then respond to other amendments in the group when I wind up.

[Baroness McIntosh of Pickering (Con)]

I am grateful for that clarification.

I welcome the government amendment in this group. However, I seek a specific assurance from the Minister as to exactly how and when the Government will ensure that the impact of GB Energy’s activities will not harm sustainable development in the United Kingdom. Why I prefer the wording of my amendment to the Minister’s, and why I regret the fact that the framework document will not be available before the passage of the Bill through Parliament, is because the Environment Act 2021 set out very clear environmental standards that have to be followed in subsequent legislation.

Amendment 40 addresses the issue of Great British Energy operating in such a way as to meet the criteria and environmental standards in the Environment Act 2021, which set out clear standards for environment and animal welfare that any project approved by GB Energy should meet. The projects we have discussed during the passage of the Bill potentially risk criss-crossing the countryside, covering the landscape with intrusive miles of pylons and overhead transmission lines, as well as massive solar farms and battery storage plants, the latter also posing a fire risk. Up to 10% of land currently farmed could be taken out of production, with a consequential effect on farming and food security to create a strand of energy which will bring no local benefits whatever but feed energy into the already well-fed National Grid.

I call on the Government to address offshore wind farms in a clear and pragmatic way, with one planning application for any future offshore wind farm taken at the same time as permission to build an onshore substation, to take the electricity generated and, at the same time, any proposal for onward transmission of the energy through overhead power lines and pylons.

Other damaging aspects of offshore wind farms at severe odds with sustainable development are their impact on fishers and fisheries. Wind farms damage marine life and sea mammals, and interfere with fishers going about their business. I am grateful to the National Federation of Fishermen’s Organisations for its briefing, which clearly highlights the threat from offshore renewables, primarily winds but also wave and tidal.

Ten per cent of UK seas will be designated as highly protected marine areas, where fishing will be banned. The worst-case scenario could result in the loss of half of the UK’s fishing waters, some 375,000 square kilometres: Scotland would lose 56% of its fishing waters and England and Wales 36% of theirs. Even if the worst-case assumptions are not realised, 38% of UK waters are likely to be lost, threatening the very existence of UK fishing businesses and causing severe harm to coastal communities.

I feel that the sentiments expressed in Amendment 40 sum up those also expressed in Amendments 47 and 48, in the name of my noble friend Lord Offord, and Amendment 51, in the name of my noble friend Lord Fuller. All I seek this evening is an assurance that farmland and residential properties will be protected from massive solar farms, battery storage plants and the like, and the impact of major substations bringing electricity onshore from these offshore wind farms. The long lines of unwelcome, intrusive overhead lines transmitting the energy to the National Grid should be removed or reduced and spatial rights for fishers should be recognised. I hope that the Minister will look kindly on the assurance that I seek.

Great British Energy Bill

Debate between Lord Hunt of Kings Heath and Baroness McIntosh of Pickering

Committee stage
Tuesday 17th December 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

May I have a reply, if possible, on having joined-up planning applications for offshore oilfields and substations or pylons, so there is one planning application for the whole project?

[Lord Hunt of Kings Heath (Lab)]

I am sorry, I should have responded. Clearly, the noble Baroness will know from the Clean Power 2030 Action Plan the Government’s intent with regard to planning generally. She will have seen what we said in it about seeking to reform the whole planning process. I will ensure that the point she makes is embraced within that. I see the force of her arguments.

Private Low-carbon Investment: Green Finance Institute Report

Debate between Lord Hunt of Kings Heath and Baroness McIntosh of Pickering

Monday 9th December 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, the noble Lord is absolutely right that this is an important area of policy. We reckon that buildings account for 31% of total UK emissions, and heating is 75% of that proportion of emissions, so I very much take his point that there is an urgent need to make progress. I cannot give him an exact time. Looking at international experience of these kinds of schemes, it is not altogether positive. In the US experience, for instance, it may have worked for multi-occupational commercial properties but, for individuals, it does not seem to have made much progress.

[Baroness McIntosh of Pickering (Con)]

My Lords, does the Minister not share my disappointment that his Government have no plans to review the level of the warm homes discount? Given that there does not seem to be any urgency in renovating existing homes, will he use his good offices to put pressure on the Government to review the level of the warm homes discount? I refer to my interest as president of National Energy Action.

[Lord Hunt of Kings Heath (Lab)]

My Lords, this is the third time the noble Baroness has asked me this question in the last two weeks. I am afraid that we have not moved on from that position. On the warm homes plan, as she will know, we made it clear in the Budget that we will see a total investment of £3.2 billion in warmer homes across 2025-26. She is right that making progress in relation to energy-efficient homes is very important indeed.

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024

Debate between Lord Hunt of Kings Heath and Baroness McIntosh of Pickering

Monday 2nd December 2024 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, the draft order was laid before Parliament on 22 October. The UK Emissions Trading Scheme, the UK ETS, was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020, otherwise known as the 2020 order, as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions reduction targets and net-zero goal. The scheme is run by the UK ETS authority, a joint body comprising the UK Government and the devolved Governments. Our aim is to be predictable and responsible guardians of the scheme and its markets.

We have brought forward this SI to enable several important changes and improvements to the scheme. It resets the UK ETS cap to be in line with the top of the net-zero consistent range. The cap sets a limit on how many allowances can be created over the trading period, which runs from 2021 to 2030, and in each year. That level reduces over time to drive down total emissions. When this scheme was established, the cap for the legislated period of the UK ETS, from 2021 to 2030, was set at 5% below the UK’s expected notional share of the EU ETS cap for the same period. However, this was not consistent with the UK’s net-zero trajectory for the traded sector. This instrument brings the overall UK ETS cap in line with our net-zero target and carbon budgets under the Climate Change Act.

This statutory instrument also reduces the industry cap, which is the total number of allowances which can be made available to existing installations for free, if no cross-sectoral correction factor mitigation is applied. This SI reduces the absolute level of the industry cap while increasing its proportion of the overall cap. While the share of allowances set aside for this purpose will increase from 37% to 40%, the reduction in the overall UK ETS cap means that the industry cap will fall. That will help to mitigate the risk of carbon leakage across participating sectors while maintaining an effective incentive to decarbonise.

The statutory instrument creates a flexible reserve of allowances for maintaining market stability and sufficient carbon leakage mitigation. In addition to allowances specifically created for this reserve, unallocated free allowances from the industry cap and designated free allowances that are returned by operators due to changes in participant eligibility or activity level reductions will also stock the flexible reserve. The flexible reserve can be used to increase allowance supply for market stability purposes, if the cost containment mechanism is triggered. The flexible reserve can also mitigate application of the CSCF through a uniform reduction to all eligible existing participants’ free allocation if the eligibility for free allocation exceeds the industry cap.

Under current legislation, carbon dioxide released through flaring in the upstream oil and gas sector is included in the UK ETS, as it is within the scope of the regulated activity of combustion. This SI introduces CO₂ released through venting in the upstream oil and gas sector into the scope of the UK ETS for installations already covered by the scheme. That means that such emissions will also be subject to a carbon price.

The controlled processes of venting and flaring can sometimes be essential for safety purposes. They are also used in more routine situations where the oil and gas hydrocarbons are unable to be used, exported or reinjected without the CO₂ being removed. The removed CO₂ can then be released in the process of flaring, when waste gas—including the stripped-out CO₂, as well as combustible elements—is ignited, or venting, where unignited gas is released through a vent. The legislation will remove a perverse incentive whereby operators could routinely vent gas that contains carbon dioxide without it being subject to a carbon price, even though it would, if flared, constitute reportable emissions for the purpose of the scheme.

In line with the original policy intent, the instrument extends legislative amendments made by the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 to Northern Ireland. The amendments include capping aviation free allocation at 100% of emissions, clarifying the treatment of carbon capture and storage plants, and amendments to free allocation rules for electricity generation.

In 2022, a memorandum of understanding between the UK Government and the Swiss Government was signed, setting out the intention to include flights from the UK to Switzerland in the UK ETS. Flights from Great Britain to Switzerland were brought into the scope of the UK ETS on 1 January 2023 by the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Order 2022. The statutory instrument before us extends the scope to cover flights that depart from an aerodrome in Northern Ireland and arrive at an aerodrome in Switzerland.

On enforcement and penalties, scheme regulators are responsible for enforcing compliance, including operational functions such as issuing penalties. The statutory instrument makes a number of amendments to the levels of scheme penalties to ensure consistency and proportionality of enforcement for all operators. It also introduces a new deficit notice, with an associated penalty, to strengthen enforcement of the fundamental scheme obligation to surrender allowances equal to an operator’s annual emissions.

Finally, this instrument makes several corrections and clarifications to existing legislation. The changes follow appropriate and comprehensive consultation with stakeholders. In the Developing the UK Emissions Trading Scheme (UK ETS) consultation in 2022, the UK ETS Authority considered proposals on changes to the rules for sectors covered by the UK ETS to ensure that more greenhouse gas emissions were covered by the scheme, along with changes to the cap.

The authority’s response to this consultation was published in two parts: in August 2023 and July 2023. A majority of respondents agreed with the UK ETS Authority’s proposals on creating a flexible share reserve of allowances; on bringing venting in the upstream oil and gas sector into the scope of the ETS; and on the addition of a new penalty and deficit notice. Several respondents expressed concern regarding the reduction of the cap and the changes to the industry cap.

An assessment of these responses informed the decision to set the cap at the top of the net-zero consistent range. Between 23 February 2024 and 8 March 2024, the UK ETS Authority ran a targeted consultation on the minor penalty amendments. The responses to this consultation were in broad agreement with the proposals or noted that they were not affected by them. The authority’s response to this targeted consultation has been published in advance of the laying of this statutory instrument.

In conclusion, the changes in the draft order will deliver on commitments made by the UK ETS Authority and improve the operation of the scheme. The alterations to the UK Emissions Trading Scheme will support its role as a key pillar of the UK’s climate policy. They show that we will take action to extend and improve the scheme where necessary. I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank the Minister for setting out the contents of the instrument so concisely but comprehensively. I support it but have a number of questions. Obviously, the issue of flaring would arise if the Government were to introduce a policy of fracking—hydraulic fracturing. Can the Minister confirm that the Government have a moratorium on fracking? It was a very real issue in North Yorkshire when I was still a Member of Parliament there; it caused real concern among the locals. It would be interesting to know the answer because flaring would be an issue there.

Secondly, I see that an impact assessment has not been prepared on this occasion because it is not a regulatory provision, but in fact one was done already in 2023, and before that in 2020. Can the Minister confirm that the costs in light of the change to the cap will not be deemed wildly different from the results of those impact assessments in 2020 and 2023, which I understand were different in nature in each case?

It is interesting that the Minister, the instrument and the Explanatory Memorandum refer to the amendment to include flights from Great Britain to Switzerland within the scope. Why was this excluded in the first instance? Were there no flights from that airport? Have they suddenly increased in capacity? Out of interest, which flights are included? In the normal scheme of things, would all major airports and flights to the European Union and Switzerland be included? I imagine they would be, but it would be helpful if the Minister could confirm that.

COP 29

Debate between Lord Hunt of Kings Heath and Baroness McIntosh of Pickering

Thursday 28th November 2024 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, it is clearly an interesting question. The noble Lord will have seen that some of the country participants in Baku were very unhappy with parts of the process. Some felt excluded from some of the key corridor discussions, if I can put it that way. The problem is that it is the only forum that we have for discussing and negotiating these important matters. Whatever fora you have, if you have over 190 countries involved, it is going to be very complex. Notwithstanding that I understand the frustrations of many countries and the difficulties, the fact that agreement was reached and we can now see clear a line to Brazil next year means that we need to continue to work with the process and encourage it to be run as effectively as possible. I do not see any option but to go with the COP process.

[Baroness McIntosh of Pickering (Con)]

The noble Earl, Lord Russell, raised the warm homes discount. I am the honorary president of National Energy Action. I see that the discount rate is still £150. Given the current level of electricity bills, this seems quite low and not to have been reviewed for some time. Will the Minister review this and look at the level of the warm homes discount?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I have to say to the noble Baroness that at the moment we do not have any plans to review it.