Energy Prices Bill

Lord Lennie Excerpts

3rd reading
Tuesday 25th October 2022 Lords Chamber

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

My Lords, it is my great pleasure to thank all those who have supported the progress of the Bill so far. Let me first thank the Opposition—the noble Lords, Lord Lennie and Lord McNicol, and all their colleagues—for their co-operation in progressing this expedited Bill. I am extremely conscious of the fact—and the House should be aware—that we could not be doing this legislation as fast as we are without the consent of opposition parties. I am grateful to them for that. I also pay tribute to the noble Lord, Lord Teverson, for his invaluable work and contributions, and thank all other Members who contributed to our debates, helping ensure that the Bill is of most benefit to our nation.

I thank the Welsh and Scottish Governments for their support for the Bill. I very much welcome the Senedd’s and Scottish Parliament’s decision to provide legislative consent for the elements of the Bill that impact on devolved competence. We got very late notice of the Scottish Parliament granting it, so I am grateful for that.

I thank the Northern Ireland Executive’s Department for the Economy and Department of Finance for their constructive engagement during the drafting of the Bill. In the absence of an Executive, a legislative consent Motion cannot be secured from the Northern Ireland Assembly. Given the urgent need for this Bill to give financial support to the people and businesses of Northern Ireland, the UK Government are legislating on behalf of the Northern Ireland Assembly. Ministers in Northern Ireland have been made aware of this, and my department will continue to engage with the Northern Ireland Executive on devolved matters as the Bill is implemented.

Let me also thank the House of Lords Public Bill Office, the House clerks, and the Office of the Parliamentary Counsel for their extremely hard work in drafting the Bill at pace and ensuring that it could be expedited through this House. As always, Ayeesha Bhutta, the principal private secretary to the Leader and Chief Whip, has been a total star in keeping us all right on the procedure of the Bill.

My thanks go to all the policy, analytical and legal officials in BEIS for their expert advice, resilience and, above all, sheer hard work. Many of them worked round the clock and at weekends to deliver this package of support for our nation. They are a credit to the Civil Service, and I thank them for their work.

I would like to thank my private secretary, Matthew Sachak, and the senior responsible officer for the Bill, Jeremy Allen. I must also thank the Bill team: Jessica Lee, Safia Miyanji, Kirsten Horton, Nicholas Vail, Salisa Kaur, Abi Gambel, Luke Rawcliffe, James Banfield, Matthew Pugh, Laura Jackson, Phaedra Hartley and Nicholas Benjamin. I cannot forget the BEIS lawyers, who do their level best to keep me apprised of legal matters —and sometimes even succeed: Wei Lynn, Alex Bentley, Charles Grant, Stephanie Bisset, Matthew Orme, Genna King, Alex Ivett, Susie Squire, Giovanna Amodeo and Sylvia Campigotto.

Russia’s illegal invasion of Ukraine has affected families and businesses up and down this country. This is the moment to be bold. The Government have acted immediately and dealt with the crisis hands on, ensuring people can keep their homes warm and businesses are kept open during the winter months.

The Bill includes powers to stop volatile and high gas prices dictating the cost of electricity produced by much cheaper renewables, which will be to the benefit of bill payers. The Bill puts energy bills support for people, businesses, charities and the public sector across the nation on a secure legislative footing. It is a vital step in delivering an unprecedented package of assistance for the whole of the UK. I thank noble Lords for their patience and commend this Bill to the House.

[Lord Lennie (Lab)]

My Lords, briefly, I thank the Minister and his Whip, the noble Baroness, Lady Bloomfield, for their co-operation and hard work during the speedy passage of the Bill. I also thank both the noble Lord, Lord Teverson, on the Liberal Democrat Benches for his knowledge of these matters, and especially my noble friend Lord McNicol, who, while not in his place today, came in at the last minute to support me in the absence of my noble friend Lady Blake. Finally, I thank Milton Brown from the legislative team in the Labour office for keeping us up to date and on message throughout the process. The Bill will now be referred to the other place, and we wish it well in its speedy implementation.

[Lord Teverson (LD)]

My Lords, we on these Benches very much support the Bill, although it might have a few Henry VIII powers and go a little further than it needs to. However, it is clearly absolutely essential for households getting through the winter to come. I very much thank the Minister and the noble Baroness, Lady Bloomfield, for their work from the Government Benches, and all his other officials who have been involved. On our side, I also thank Sarah Pughe from our Whips’ Office. I also thank the Labour Front Bench, and particularly the noble Lord, Lord Lennie, for their co-operation and for the work we have done together. I make one least plea to the Minister, with which I am sure he will agree: it is very important that we manage to deliver the benefits that the Bill gives to those who are off-grid. I know that he and his officials will work hard to ensure that this is the case, although I understand that it will be difficult.

Energy Prices Bill

Lord Lennie Excerpts

Committee stage
Monday 24th October 2022 Lords Chamber

Moved by

[Lord Lennie]

1: Clause 2, page 3, line 7, leave out “negative” and insert “affirmative”
Member’s explanatory statement
This amendment and others in the name of Lord Lennie make the regulations in the relevant sections subject to the affirmative procedure.

[Lord Lennie (Lab)]

My Lords, this group of amendments is all about making various clauses subject to the affirmative procedure in your Lordships’ House. I give notice that we intend to divide the House on Amendment 25.

The amendments affect Clauses 2, 3, 6, 7 and 16, and Schedules 1 and 2, making them subject to the affirmative procedure. The Government seek to justify some of the use of the negative procedure by pointing out that the Secretary of State already has the power to modify or revoke the schemes in Clauses 2 and 3, and Clauses 6 and 7 for Northern Ireland.

Clause 16, which confers powers to make it a temporary requirement on electricity generators to make payment regulations, uses the affirmative procedure on first use and the negative procedure thereafter. The Government’s justification for a temporary requirement represents a significant intervention in the electricity market. This clause will define the main parameters of the scheme. After this, the Government believe that interest will wane, with only minor or technical amendments likely to occur, therefore justifying the negative procedure thereafter.

The justification for the Schedule 1 powers is that, although the Government recognise that the powers are significant, they are necessary to allow the schemes for relief of GB businesses. The Delegated Powers and Regulatory Reform Committee report, established in haste last week, says that by including paragraph 3(2) of Schedule 1 the Government have completely ignored the recommendation contained in its report:

“No attempt has been made to limit the powers or to ensure that they will be subject to parliamentary scrutiny.”


Nor was any “compelling justification” offered to support the Government taking these powers. Schedule 2 powers relate to Northern Ireland, where a similar provision is proposed.

In Clauses 21 and 22, the subject of Amendment 25, the Government assert that their approach would include a fuller period of consultation with relevant stakeholders providing suppliers with earlier certainty. However, what guarantee is there that these steps will ever be taken? The department also considers that any delay could have negative consequences for those who were to benefit from the scheme. However, there are enough examples of regulations being scrutinised after the fact—for instance, those relating to Covid—and even after this primary legislation, which, as it stands, took effect from 1 October 2022. I cannot see why this cannot be applied here.

The pace of things is another justification offered by the Government. The affirmative procedure would not allow certainty that the licence modifications would follow and this in turn would inhibit suppliers making required operational changes, slowing delivery this winter.

There does not seem much justification for the Secretary of State taking these overwhelming powers. Clause 22 applies similar powers to Northern Ireland, also without the same compelling justification. It allows the Secretary of State to tackle barriers to delivering implementation of the schemes as necessary. There appears no justification for this at all. The Delegated Powers and Regulatory Reform Committee is firmly of the view that any power conferred by Clause 22 is inappropriate and that the Government should act by,

“imposing a time limit on the exercise of the power which is commensurate with other time limits contained within the Bill.”

I beg to move.

[Lord Rooker (Lab)]

My Lords, I shall speak briefly to some of the amendments in my name in this group. This is the only time I shall intervene. Although I have tabled amendments in the second and fourth groups, I do not propose to speak to them. What I am about to say covers the same points.

I declare an interest as a member of the Delegated Powers and Regulatory Reform Committee. I do not speak for the committee; the report does that. Over the weekend, I read the Government’s inadequate response to the report. I am grateful for the speed with which the Government responded, as I suspect other committee members are. That was useful but their response was completely inadequate. It is significant that the government response makes no mention at all of the Delegated Powers Committee’s report from November 2021, Democracy Denied? The Urgent Need to Rebalance Power between Parliament and the Executive.

Clause 22(5), which is not referred to in the government response, is the subject of Amendment 28. According to paragraph 14 of the Delegated Powers Committee’s report, Clause 22(5) is, in effect,

“a Henry VIII power because it allows the effect of legislation, including primary legislation, to be modified by a direction.”

Paragraph 14 also says:

“There are no limits on the kinds of requirements which may be imposed through the directions power.”


Paragraphs 14 to 18 say firmly that the powers in Clause 22 are inappropriate. Clause 22 brings in what is referred to as “disguised law”. This was referred to in the November 2021 report as “camouflaged legislation” and an “unacceptable ploy”.

The Delegated Powers Committee report on this Bill refers to the memorandum supplied with the Bill, particularly paragraphs 154 to 162. Referring to the government memo, the report says that it

“does not explain the full range of the things which can be done”.

It goes on to say, in paragraph 16:

“We are also not convinced by the reasons given in the Memorandum for the power not being subject to parliamentary scrutiny.”


As such, the Delegated Powers Committee report says that the Government appear

“to have completed ignored the recommendations”

in the committee’s report of November 2021.

I want to make a more general point, which I shall not repeat on the other group of amendments. I was not a member of the Delegated Powers Committee when its November 2021 report, Democracy Denied?, was published, in tandem and in co-operation with a report from the Secondary Legislation Scrutiny Committee of your Lordships’ House, entitled Government by Diktat: A Call to Return Power to Parliament. Both reports—that from the Delegated Powers Committee and that from the Secondary Legislation Scrutiny Committee—were about Parliament and the Executive. They were not about this House and the elected House of Commons. Parliament and the Executive are what this is about.

Both reports were debated in this House on 6 January under a Motion tabled by the noble Baroness, Lady Cavendish of Little Venice. I have no criticism of the Minister or his team for reasons I shall make clear. I do not expect he has read either report; I am not sure any Minister has. I do not hold the Minister responsible. He and his government colleagues are taking advantage of the slack role Parliament has played to bequeath powers from Parliament to the Executive.

On Wednesday 20 July this year—a significant date because it was the day before the Summer Recess started—both the Secondary Legislation Scrutiny Committee and the Delegated Powers and Regulatory Reform Committee, including Peers who had been members of those committees last year when the reports were prepared, took evidence on the reports from the then Leaders of both Houses and First Parliamentary Counsel. There was no sign that anybody had read anything about the 6 January debate on both of them. It was abundantly clear that neither of the then Leaders had even been briefed on the views of this House.

Parliamentary counsel have clearly continued to draft Bills, such as this Bill, which have “completely ignored” the recommendations of the Delegated Powers and Regulatory Reform Committee report, Democracy Denied? Why have they done this? Repeatedly, parliamentary counsel are producing Bills which transfer powers from Parliament to the Executive. It is parliamentary counsel doing this—they draft the Bills.

During the exchanges on 20 July in respect of what is referred to as Question 16, I asked the First Parliamentary Counsel, Dame Elizabeth Gardiner, about her saying during our evidence that day that counsel

“have that discussion on a daily basis with the teams and with the Ministers about the nature of what they are asking for”.

I pointed out that, in my time as a Minister, in both Houses, over 12 years—it is in the minutes—

“I understood … that parliamentary counsel took instructions from the department’s lawyers and Ministers never got involved with parliamentary counsel.”


Dame Elizabeth’s answer was:

“I think things have changed a lot ... Probably we do meet policy officials and Ministers more frequently on Bills than we would have done 30 years ago”.


I have checked on this. I think this change, or breach of convention, has happened in the past 12 years. My experience, particularly in two departments, as I recall, when I served in this House—there were four altogether, but two in particular—was that it was specifically said to me when I joined, because Bills came up, that in general the Government accepted most of the recommendations from the Delegated Powers and Regulatory Reform Committee. It was the norm to accept the majority. I was repeatedly told that. I think this change, or breach of convention—it is certainly a lapse in the accepted standards of conduct—has happened only since 2010, when somebody started playing wild with parliamentary procedures, and the House of Commons was blindsided by it. That, I think, is very dangerous.

I am prepared to say that I think the old way was best. If lawyers gave instructions for policy officials so that the policy officials would have to say to department’s lawyers, “This is what we want to do, and what our Ministers want to do”, the lawyers would then use the legal structures to put that case to parliamentary counsel. By and large, the system worked. I think it would be far less likely that clear recommendations made by Parliament would be “completely ignored” if the lawyers were the ones who gave the instructions to parliamentary counsel, as was the case up until 2010.

I trust the lawyers here to follow the conventions. Quite clearly, parliamentary counsel work with the Government—let us make no bones about it. These days, they do not even have their own office block in Whitehall, to which I was once invited to when I was a Minister in the other place. I know the way they work; they are now ensconced inside the Treasury. They work for the Government; they are not independent.

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[Lord Lennie (Lab)]

My Lords, that is an interesting explanation from the lawyers about whether it is a Henry VIII clause. If it looks like a Henry VIII clause and it smells like a Henry VIII clause, it is a Henry VIII clause.

My noble friends Lord Rooker and Lord Cunningham made the important point that the DPRR Committee in its report has condemned the powers contained in Clause 22. There is no getting away from it: if it is pace that the Government are seeking, subjecting those instruments to the affirmative procedure would not significantly inhibit the pace at which they operate. The powers are vast and huge, and the example that the Minister has given is an acceptable one, but it is not the only circumstance that one can envisage. One can envisage the powers being used not by the noble Lord but by a succeeding Minister, in a way that is unforeseen by him. Therefore, the concerns remain. However, having said that, I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

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[Lord Teverson (LD)]

My Lords, I shall speak also to Amendment 6 in this group. Amendment 5 relates to the extension of the energy bill relief scheme for non-domestic customers. I hope that it is something that the Minister will be able to agree or reaffirm from the Dispatch Box, because it is really very straightforward. When the scheme was announced by the Government, only businesses that signed a fixed agreement after 1 April 2022 and those on variable rates were set to benefit. Businesses with energy agreements signed before this date—I repeat, that was 1 April—were unable to get a subsidy to their unit prices.

In the debate on the economy and the growth plan of 2022 in the House on Monday 10 October—so not so long ago—my noble friend Lord Fox raised this with the Minister, who responded that the Government would be “revising the cut-off date” so that contracts taken out between 1 December 2021 and 31 March 2022 would be “eligible for relief”. Can the Minister confirm that this is still the Government’s intention? If it is, given the uncertainty that businesses are facing with the current state of government, will he accept my Amendment 5, which seeks to put that commitment in the Bill? I see no reason why that should not be the case, to give absolute clarity and greater certainty to the non-domestic sector.

On Amendment 6, the alternative fuel payment scheme is intended to deliver a one-off payment of £100 to UK households which are not on the mains gas grid—I declare my own interest in that I rely on biomass and oil—and therefore use alternative fuels such as heating oil to heat their homes.

Powers in the Bill will enable the Government to deliver support via electricity bills under a similar delivery model to the energy bills support scheme, which, as noble Members will know, is a £400 non-repayable discount for eligible households to help with their energy bills, as announced in April by then Chancellor and soon-to-be Prime Minister Rishi Sunak. Households who are eligible for but do not receive alternative fuel payments or the £100 heat network payment—a very round number, as we saw on Second Reading—because they do not have a relationship with an electricity supplier, for example, will receive the £100 via this alternative fund, which will be provided by a designated body. According to the Government, they will set out timing and details of this payment soon. I look forward to hearing from the Minister whether we have any more detail at this time.

It is estimated that more than 4 million people in the UK are off the mains gas grid and rely on other means to heat their homes. As I know in Cornwall, fuel poverty is greater in rural areas than in urban areas and, crucially, it is often deeper, meaning that rural families need to save more money to make sure their energy bills are affordable. This amendment says that it is vital that a fast and easy way to use this system be set up to get these payments to them. Amendment 6 would ensure that payments are made directly to consumers’ bank accounts, which is clearly the quickest and easiest way to make the biggest difference to rural and off-grid customers. Therefore, I hope the Government will be able to accept this amendment, but I certainly hope that the Minister will be able to give more detail and a timeframe so that these particular consumers know their future. I beg to move.

[Lord Lennie (Lab)]

My Lords, our Amendments 37 and 38 seek to backdate the electricity and gas price reduction scheme to 8 September, which was the day the Government first announced the energy price guarantee. Apart from anything else, this would produce money to be passed on to customers’ bills. It may seem a small change, but it would be extremely popular among all UK households.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Lords, Lord Rooker, Lord Teverson, Lord Lennie and Lord McNicol of West Kilbride, for their amendments, which seek to make changes to the schemes to reduce energy bills—namely the alternative fuel payments, the domestic energy price guarantee and the energy bill relief scheme.

First, turning to Amendment 5 tabled by the noble Lord, Lord Teverson, on the energy bill relief scheme, I am pleased to note that he agrees with the decision to extend the eligibility date for customers on fixed-term contracts back to 1 December 2021, which my noble friend Lord Callanan confirmed in this House on 10 October. This will be implemented in regulations. I can give further reassurance that when the scheme was first announced on 23 September, it stated that all non-domestic customers on variable contracts, as well as deemed and flexible contracts, will be eligible for the scheme. Given that these details have already been published and will be implemented in regulations, the proposed changes to the Bill are unnecessary. I hope that gives the noble Lord the reassurance he was seeking.

I turn to the amendment tabled by the noble Lord, Lord Rooker, which seeks to remove Clause 9. This clause provides for the establishment of the energy bill relief scheme in Great Britain. This scheme will provide a price reduction to ensure that all businesses and other non-domestic customers—for example, charities and public sector organisations such as schools and hospitals—are protected from excessively high energy bills over the winter period. Under the provisions in Clause 9, the Secretary of State may, by regulations, reduce the amount that all eligible businesses and other non-domestic customers would be charged for their gas and electricity. Clause 9 allows for this through the calculation of a notional wholesale price for gas and electricity, referred to as the government-supported price, with a discount being provided which pays the difference between the government-supported price and the wholesale price.

The clause provides for regulations to detail how the Government may calculate this reduction. We intend for the scheme to run initially for a six-month period. Schedule 6 to the Bill allows for the scheme to be extended for up to three further consecutive periods for up to two years. We recognise that the diversity of contracts between suppliers and their non-domestic customers makes implementation of the scheme complex. This clause therefore provides for necessary powers to support successful delivery of all aspects of the scheme, and to allow the Government to respond appropriately to any rapid changes in the market. I therefore ask that Clause 9 stand part of the Bill.

Turning to Amendment 6, tabled by the noble Lord, Lord Teverson, on the alternative fuel payment scheme, households eligible for the domestic alternative fuel payment scheme in Great Britain will receive £100 as a credit on their electricity bill under a similar delivery model to the energy bills support scheme; we are exploring a similar route for Northern Ireland. We understand that consumers are already experiencing significantly increased living costs, and that is why the Government are delivering this support to customers as fast as possible and have committed to delivery of the payment this winter. Requiring that payments be made direct to consumer bank accounts would significantly slow down the ability to deliver, meaning that the target to pay this winter would be unlikely to be met. This Government do not have an established direct relationship with the relevant consumers, and a bespoke delivery scheme would need to be created, which would take significant time.

Delivering the domestic alternative fuel payment as a fixed credit amount via electricity bills will be significantly quicker than other possible routes and means that customers need take no action to receive it. Consumers eligible for the domestic alternative fuel payment but who do not have a relationship with an electricity supplier will receive the £100 via the alternative fuel payment discretionary fund. Details on how to access this fund will be confirmed shortly.

Turning to Amendments 37 and 38, on the domestic energy price reduction scheme, tabled by the noble Lords, Lord Lennie and Lord McNicol of West Kilbride, I thank the noble Lords for their amendments to enable backdating of the electricity and gas price reduction scheme in Great Britain to 8 September. The energy price guarantee was implemented from 1 October so that consumers can expect to pay well below the scheduled increase in the price cap to £3,549 for a typical dual-fuel household. The energy price guarantee has been designed to work in combination with the May 2022 cost of living package to ensure that the most vulnerable households will see little change in their energy costs between last winter and the coming winter. I therefore see no need to alter the operative date of the energy price guarantee schemes. I hope that on this basis, the noble Lords will not feel it necessary to press their amendments.

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[Lord Teverson (LD)]

My Lords, without, I hope, taking away too much tension from the Committee, I am not going to press this amendment so I shall be relatively brief in explaining it. It has an important basis in the Government’s Energy (Oil and Gas) Profits Levy Act. It also has an element of looking at how the Bill and previous schemes discriminate against the renewables industry compared with fossil fuels.

A key element of Amendment 13 is to assess the impact of that date in the levy so that it applies to oil and gas profits incurred since 1 October 2021. The Government’s energy profits levy is effective from 26 May, meaning that profits accrued before that date are outside its scope. It was clear over a year ago that surging profits for the oil and gas companies were in stark contrast to the real struggle faced by ordinary people and small businesses faced with high and soaring energy costs. In fact, it was one year ago today that my right honourable friend Ed Davey MP called for the windfall tax on the profits of oil and gas companies, accompanied in due course by other parties and other parties represented in this House.

If the Chancellor had responded at that time and a levy had been in place from October, it would have raised billions more. If I could just remind the Committee of the profits since then, BP saw profits rise by 138% between quarter 1 of 2021 and quarter 1 of 2022—from £2.6 billion to £6.2 billion; it was similar for Shell. These combined super-profits alone amount to £7.5 billion in the first quarter of 2022. That is £7.5 billion more than they made in the same quarter in 2021. Had those windfall profits had been taxed by the same amount, it would have raised £1.8 billion.

What we are looking for in particular here has to do with the levy. Like proposed new subsection (1) in Labour’s Amendment 14, proposed new subsection (1)(b) in Amendment 13 calls from the removal of allowances in the levy for investment in oil and gas extraction. This is one of the key differences between the revenue cap on renewables and the fossil fuel industry, where there is that huge investment incentive of getting 80% back for investment in—dare I say?—fossil fuels, obviously. That is where we want there to be quality.

We on these Benches know, as do Members from other parts of the House, that renewables, rather than fossil fuels, are really the way forward. The Government have committed themselves to a large amount of investment in offshore wind. We recognise that but we need to keep at least a level playing field in taxation matters between renewables and fossil fuels. I very much believe that we need then to push investment in renewables further forward. I beg to move.

[Lord Lennie (Lab)]

My Lords, the whole question of the energy market is complicated and beset by a series of legislative procedures which can cause confusion. That said, the new clause proposed by Amendment 14 would simply require the Secretary of State to produce a report assessing the impact of removing the investment allowance from oil and gas companies, as set out in the Energy (Oil and Gas) Profits Levy Act, and, in particular, to assess the impact on domestic and non-domestic users. Currently, oil and gas companies receive an 80% rebate on every pound invested but that is not available to renewables or other zero-carbon technology. This appears to tilt the market away from investments in cheaper domestic clean power sources towards oil, gas and fracking.

The proposed new clause would require the Government to assess the revenue and profits of electricity generators and oil and gas producers every six months, to see what the effects would be. Amendment 20 would require the Secretary of State to disaggregate the cost of production of natural gas from the cost of production of other energy sources to reduce the cost of electricity to domestic and commercial consumers. This dates back to when gas was the only game in town for energy companies; now, renewables account for 43% of the generation mix.

Gas prices have increased fourfold since the beginning of 2011, which means that consumers are paying much more for electricity than the average cost of generation across the market. Splitting the market is a likely consequence, by creating a separate pool for cheaper, intermittent, renewable generation and a second for traditional fossil fuel, which in turn could lead to consumers determining when to use cheaper electricity for things such as car charging by timing their usage accordingly. Electricity prices would be determined competitively by companies considering their own boundaries rather than working through gas. I give notice of our attention to move Amendment 14 to a vote.

[Lord Callanan (Con)]

I thank all noble Lords who have tabled amendments in this area, on the energy profits levy, including an amendment that seeks to reduce the costs of electricity to consumers.

I start with Amendment 13, tabled by the noble Lord, Lord Teverson, which would require the Secretary of State to publish a report on the additional revenue that could be raised from expanding the energy profits levy. I shall say something very similar to what I said to the noble Lord, Lord Foster, that all taxes are kept under review, and any changes in tax policy should be considered and announced by the Chancellor, in line with the usual Budget processes. The Treasury view, therefore, is that this amendment is not appropriate for this Bill.

The energy profits levy has been designed with a bespoke tax base, appropriate to respond to the extraordinary global context of high oil and gas prices. The levy is expected to raise substantial revenue while providing companies with a new incentive for investment. It is right that we continue to encourage investment in North Sea oil and gas to strengthen the UK’s vital offshore oil and gas sector and bolster our future energy security. The amendment would also require the Government to produce an estimate of upstream profits expected in the next two years. Such estimates will be highly sensitive to commodity price fluctuations. Given the volatility in prices since last year and that most companies’ out-turn profits are publicly available, it is not clear that producing such an estimate would be a beneficial use of public resources.

I turn to Amendment 14, tabled by the noble Lords, Lord Lennie and Lord McNicol. This amendment requires the Secretary of State to publish a report on the impact of removing the investment allowance in the energy profits levy. The Treasury has made clear its view that it is not for this House to discuss the matters raised by this amendment in relation to this Bill, on the basis that fiscal issues are a matter for the House of Commons. Tax policy changes are an area for the Treasury, which believes that the Chancellor should consider and announce any changes in line with the usual Budget process. Taxation on the profits of oil and gas producers is not in scope of this Bill. The energy profits levy, introduced under the Energy (Oil and Gas) Profits Levy Act 2022, has been in place since May. It is not standard for the Government to publish assessments of the economic impacts of measures that they are not introducing. The Government already monitor the UK oil and gas sector; data on upstream production is published regularly on GOV.UK. It is not clear how a report on the impact of a hypothetical change would be a beneficial use of public resources.

I turn to Amendment 15, also tabled by the noble Lords, Lord Lennie and Lord McNicol, which would require the Secretary of State to publish an assessment of the revenue and profits of electricity generators and oil and gas producers every six months. The profits of oil and gas producers are not in scope of these measures but are subject to the energy profits levy, which has been in place since May. The out-turn revenue and profits of most electricity generators are already in the public domain, so I do not believe this amendment is necessary. The objective of the Energy Prices Bill is to protect consumers from very high energy prices. We recognise that we must strike a balance that is fair to generators, achieves value for money for consumers and maintains investor confidence. That is why it is appropriate that the House gets the chance to debate fully the first set of regulations made under the temporary cost-plus revenue limit.

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Moved by

[Lord Lennie]

14: After Clause 15, insert the following new Clause—
“Report on additional expenditure treated as incurred for purposes of section 1 of the Energy (Oil and Gas) Profits Levy Act 2022
(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report on the effect of removing the allowance under section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022.(2) The report must set out projections of the effect of the reduction set out in subsection (1) on domestic and non-domestic energy bills.”Member’s explanatory statement
This new Clause requires the Secretary of State to produce a report assessing the impact of removing the investment allowance for oil and gas companies as set out in the Energy (Oil and Gas) Profits Levy Act, and in particular to assess the impact on domestic and non-domestic bills.

[Lord Lennie (Lab)]

My Lords, the welcome part of the Minister’s statement was the consideration of disaggregating gas from electricity. We welcome that and look forward to seeing the outcome. But Amendment 14 simply asks for a report to be produced; it is not trying to interfere in Treasury decisions or to do anything about fiscal policy. It is simply trying to find out whether the market is distorted and, if it is, by how much. I wish to test the opinion of the House on this amendment.

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Moved by

[Lord Lennie]

25: Clause 22, page 21, line 1, after “may” insert “by regulations”
Member’s explanatory statement
This amendment and others in the name of Lord Lennie make the powers in Clause 22 subject to affirmative parliamentary procedure including a sunset Clause.

[Lord Lennie (Lab)]

My Lords, I just want to remind the House of the warnings and the contribution from the noble Lords, Lord Rooker and Lord Cunningham, about the Government ignoring the recommendations of the DPRRC as against the normal practice of this House. I beg to test the opinion of the House.

Energy Prices Bill

Lord Lennie Excerpts

2nd reading
Wednesday 19th October 2022 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I confirm to the Minister that we support the passage of the Energy Prices Bill, but can he explain to the House whatever has happened to the Energy Bill, which has been shelved somewhere, waiting for someone to make a decision about its future? Without support, consumers and small businesses would be facing an eye-watering increase in their bills—estimated to be somewhere between £5,000 and £10,000, respectively—so the Government have acted and the Opposition support them in doing so. Having said that, they are in a deep mess entirely of their own making.

To give noble Lords a recent example, on Monday I, and perhaps other noble Lords, received a letter from the Minister inviting me to yesterday’s briefing about this Bill. In the letter, the Minister wrote in the first highlighted, bullet-pointed paragraph:

“The Energy Price Guarantee will ensure that a typical household in GB pays around £2500 a year on their energy bill for the next 2 years from 1 October 2022”.


About half an hour after I received this invitation, this month’s Chancellor announced a screeching U-turn, and the two-year pledge went down to six months. Did no one tell the Minister before he wrote the letter? It reminds me of Prufrock:

“In a minute there is time

For decisions and revisions which a minute will reverse.”

My first overarching question to the Minister is this: can we rely on anything this Government are now saying?

The Energy Prices Bill is facing parliamentary scrutiny after it has been acted on. I thank the Delegated Powers and Regulatory Reform Committee for the report it published this morning, which is in essence a condemnatory judgment of the Government. The Bill has to take effect from 1 October 2022, but what does it do and what does it not do?

The unit price cap will mean an average consumer’s annual bill will rise to £2,500, in contrast to Labour’s fully funded price freeze at about £1,900 from September. There is no additional support for the 15% of off-grid households, in contrast to Labour’s plan which would provide £1,000 of help. There is also no additional support for customers on prepayment meters—4 million households—who use approximately 60% of their energy over the winter months as bills are not smoothed out. This contrasts with Labour’s plan, which would save them an average of £1,300. Ten million families will still spend more than 10% of their income on energy, according to a recent study by the University of York.

I turn to the windfall tax—or non-windfall tax—and how the Government propose to pay for this measure. They have spent the last period in office rubbishing the very idea of a windfall tax as “unconservative”, but in Clause 16 we see a windfall tax in anything but name that the Secretary of State may impose on the energy giants. The clause is titled

“Temporary requirement for electricity generators to make payments”.


I will read it out:

“The Secretary of State may, for a purpose mentioned in subsection (2), make regulations for, and in connection with, requiring periodic payments to be made to a payment administrator by … specified electricity generators … electricity generators that are of a specified description, or … electricity generators that are designated by the Secretary of State in accordance with the regulations … The purposes are … the purpose of enabling a payment administrator to obtain funds for paying to electricity suppliers in connection with reducing the cost to customers of electricity … the purpose of enabling a payment administrator to obtain funds for meeting expenditure incurred or to be incurred by the Secretary of State in reducing the cost to customers of electricity.”


If it sounds like a windfall tax, if it smells like windfall tax—it is a windfall tax. Even John Redwood described it as a “surrogate windfall tax” in the other place. Energy giants are making £170 billion in excess profits, and they may be required to make payments. Let us call it what it is: a windfall tax, and the Government should do it properly. The level set must contribute significantly to the price support for businesses and consumers. The Government must now end the absurd multi-billion-pound loophole in the windfall tax for oil and gas companies. Above all, it must be fair to customers.

Oil and gas companies are currently enjoying a massive loophole for investing in fossil fuels, so why do the Government think it right to leave billions of unearned, unexpected windfall gains in the pockets of oil and gas giants, thereby forcing people to pick up more of the costs of this support in higher borrowing and higher taxes for the future? How can the Government defend tilting the pitch away from cheap, home-grown, low-carbon power in favour of expensive, insecure, planet-wrecking fossil fuels? The powers are ill defined, the size of the levy is unknown and how much it would raise is unclear. How will the Government ensure fairness with a fossil fuel windfall tax?

The Labour Party will bring forward amendments to the Bill. In line with our fully funded policy, we would seek for the energy price guarantee to take effect from 8 September rather than 1 October. The powers in Clause 21, highlighted by the Delegated Powers Committee, and Clause 22, to modify energy licences and issue directions to licence holders, are a power grab by the Secretary of State. They are not compellingly justified and should be subject to proper parliamentary scrutiny, not the negative procedure. The Delegated Powers Committee is disdainful of what it calls “camouflaged legislation” in the Bill, saying it is “inappropriate”.

For the Government to think that the answer to a slow-to-react regulatory regime is to override it by giving powers to the Secretary of State is fanciful, especially now, with confidence in the Government’s handling of affairs at an all-time low. There is no long-term plan to get us out of the crisis. Electricity and gas prices should be delinked, and Labour would require the Government to develop a plan to do this. Consumers need some certainty to be able to plan for their futures.

There is an unfair £5 billion loophole in the existing windfall on fossil fuels, introduced by the previous Chancellor or the one before. For every £1 invested in oil, gas and fracking, companies get back 91p. Nothing like that exists for renewables or nuclear fuel, and we need this to be levelled up.

We would require the Government to report, assessing the impact of reducing the Energy (Oil and Gas) Profits Levy Act investment allowance from 80% to 5%, particularly on bills. We would also require the Government to assess the revenue and profits of electricity generators and oil and gas producers on a six-monthly basis.

On renewables, Defra is seeking to block landowners from developing solar energy farms. Some 0.1% of agricultural land is currently used for solar energy generation. If that is increased tenfold, it would mean that 1% of agricultural land was used in this way. Who does not like solar energy panels, and why not? They are capable of producing the equivalent of what 10 nuclear power stations produce for the country. We previously heard the noble Lord, Lord True, talk about the need for self-sufficiency in energy; this would be a good start.

We will lurch from crisis to crisis if we do not learn the lessons from this one. We must become much more self-sufficient in our energy production. This will mean a sprint for growth in renewables and nuclear, and a massive programme of energy efficiency across the country. The powers are with the Government, and I commend this to the House.

Prepayment Meters: Pricing

Lord Lennie Excerpts

Tuesday 11th October 2022 Lords Chamber

[Lord Callanan (Con)]

We are helping those struggling to pay bills; I refer the noble Lord to the massive programme of support that we have put in place. These charges are set by Ofgem. I am aware that the standing charge is a controversial subject, but that reflects the network costs and other costs that every customer has to bear in addition to the unit costs of gas and electricity.

[Lord Lennie (Lab)]

My Lords, there are 4 million prepayment energy customers in this country whose bills are not smoothed out over the year, unlike those who pay by direct debit. Ofgem figures show that prepayment customers are likely to pay two-thirds of their annual energy costs during the winter. What immediate measures will the Government take to help relieve pressures on these hard-pressed energy customers?

[Lord Callanan (Con)]

The answer to the noble Lord’s question is the massive programme of support we have put in place, which amounts to about £60 billion of direct payment support. Had we not put these measures in place, the average unit cost would have been about £6,000 per year; now it is down to an average of £2,500 per year. I emphasise that that is not a maximum but an average of the unit costs of energy that are capped under the price guarantee.

Energy Bill [HL]

Lord Lennie Excerpts

Committee stage
Wednesday 7th September 2022 Lords Chamber

Moved by

[Lord Lennie]

39: Clause 57, page 51, line 39, at end insert—
“(d) a carbon capture use revenue support contract.”Member's explanatory statement
See the explanatory statement for the amendment at page 3, line 11.

[Lord Lennie (Lab)]

My Lords, my amendment in this group is a re-run of part of the Committee’s discussion on Monday, and it refers to Clauses 57 and 63. It is all about the “U” in “CCUS”. More precisely, it is about the exclusion of carbon usage from the listed regulated activities in the Bill. Clauses 57 and 63 are concerned with revenue support contracts and the designation of carbon capture counterparties. Under Clause 57, regulations would explicitly set out

“a transport and storage revenue support contract … a hydrogen production revenue support contract … or … a carbon capture revenue support contract”.

There is nothing about a carbon usage revenue support contract. Similarly, in Clause 63, this Government restrict themselves to “carbon capture”, and there is nothing covering carbon usage. So I would welcome an explanation of these apparent omissions from the Minister when he responds.

I turn briefly to the amendment in the name of my noble friend Lady Liddell. She is right to seek to have direct air-sourced carbon covered by the Bill. Direct air capture is not in itself new, but what is new is the likelihood of a massive expansion in the years ahead, as we move towards achieving net zero. The International Energy Agency website is hugely informative on this, and I recommend it to all noble Lords who are interested.

Direct air capture removes CO₂ from the atmosphere, thereby offering a solution for legacy emissions. The first large-scale direct air-capture plant is set to begin operating in the United States by the middle of this decade, and Europe and Canada are set to follow. Direct air capture provides part of the solution to a strategy that sees a balancing of emissions being released with emissions being removed. It is not restricted simply to the removal of carbon from the atmosphere; its application ranges from beverages, with which we are all familiar, to future aviation fuels, helping to reduce emissions from travelling across and between continents. DAC is not the same as traditional carbon capture and storage, with which we are familiar. It is genuinely innovative and requires the attention of this Energy Bill, as my noble friend Lady Liddell will explain.

[Baroness Liddell of Coatdyke (Lab)]

My Lords, I support Amendment 49 and the introduction given by my noble friend. First, I apologise for not being around on Monday; being here was outwith my control. But I watched the debate, and my noble friend Lord Foulkes did a wonderful job. I first did a double act with him in the September of 1974, when we educated the Scottish public about devolution. Since that point, I have been lost in awe of him, not just for his knowledge but for his energy. I was recently at a significant birthday party, and the amount that that man can do is quite amazing. However, I am here today to address the carbon capture and storage issues.

I should declare an interest: I am the honorary president of the Carbon Capture and Storage Association, and I have been involved in the interest in carbon capture and storage since it was called “clean coal technology”—which gives my age away now as well.

As my noble friend Lord Foulkes pointed out, the Carbon Capture and Storage Association has been very helpful to us in drafting some of these amendments. One of the reasons why it is important to take it into account is that although an awful lot of us have been around carbon capture and storage for a long time, I do not think that most people realise the extent to which the Carbon Capture and Storage Association has changed. In the past year, there has been an exponential growth in membership, and it is coming from a lot of companies that are at the cutting edge of technology.

Our concern addressed in Amendment 49 is that Clause 63 is restrictive. We have been helped very much by the Minister’s department in looking at where we can go from this stage onwards, and it is unfortunate that the way this clause has been drafted means that the shortlisted projects that can be available during phase 2 are limited to industrial power generation and hydrogen. However, there are UK companies now developing engineered greenhouse gas removal technologies —GGRs—which are keen to connect to the CO₂ transport and storage network. At lot of these are small companies that are moving, and there is uncertainty. Many noble Lords in the Chamber today have been around carbon capture for quite some time but do not realise the extent to which new people are coming into the field. The carbon emissions committee made the point that carbon capture and storage is now a necessity, not an option.

We are waiting for the business model for these new companies to be developed; they want to join in the process in due course. It is that ability to see them join the process that is behind this amendment. It is not nit-picking; it is seeking to find a route that allows them to move forward. These technologies currently include bioenergy with carbon capture and storage, and direct air capture, which would be excluded from the process if we did not have an amendment such as this.

This will prepare the Bill for the future. It ensures that we are future-proofing and that we have the ability to move rapidly in a way that would allow the inclusive use of all technologies that can remove CO₂ from the atmosphere, not just those which capture from a commercial or industrial source. I commend Amendment 49, and make no apology for saying that we will come back at fairly regular intervals with amendments—probably small in size—which seek to take into account the new companies that are looking to enter into carbon capture and storage.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, I too welcome the noble Baroness, Lady Liddell, back to these Benches. I look forward to any parties hosted by her and the noble Lord, Lord Foulkes, in future—they sound great fun.

I first turn to Amendment 39 in the names of the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, which seeks explicitly to include the use of carbon dioxide, given that the Bill refers to carbon capture, usage and storage, or CCUS. The carbon capture revenue support contracts are intended to support the deployment of carbon capture technologies in industrial and commercial activities where there is no viable alternative to achieve deep decarbonisation.

The Bill allows for carbon capture revenue support contracts to be entered into with eligible carbon capture entities. Broadly, a carbon capture entity is a person who carries on activities of capturing carbon dioxide that has been produced by commercial or industrial activities with a view to the storage of carbon dioxide—that is, storage with a view to the permanent containment of carbon dioxide. It is important to emphasise that the provisions in the Bill may therefore allow for support of a broad range of carbon capture applications, including those carbon capture entities that utilise the carbon dioxide resulting in the storage of carbon dioxide with a view to its permanent containment. Decisions as to which carbon capture entities are eligible for support are to be made on a case-by-case basis. Prioritising support for carbon storage is considered essential to help deliver our decarbonisation targets.

I turn now to Amendment 49 in the names of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, which seeks to ensure that techniques such as direct air carbon capture and storage are included in scope of carbon capture revenue support contracts. I thank my noble friend Lord Howell of Guildford for his remarks in this regard. As part of the Net Zero Strategy published last year, the Government set out an ambition to deploy at least 5 megatonnes of carbon dioxide emissions per year of engineered greenhouse gas removal methods, such as direct air capture, by 2030.

We recognise that greenhouse gas removal technologies, commonly referred to as GGRs, such as direct air carbon capture and storage, are considered important for making progress towards net zero. That is why in July we published a GGR business model consultation that sets out the Government’s initial views on the design of a business model to attract private investment and enable engineered GGR projects to deploy at scale from the mid-to-late 2020s. The consultation is due to close on 27 September. How direct air carbon capture and storage might be supported by any such business model is still subject to ongoing policy development and consideration. Once we have further developed the policy thinking on this, we can then consider what the appropriate mechanics might be and whether there are any available. We are exploring how early GGR projects could be connected also to the transport and storage network in CCUS clusters and will publish further information in due course.

The questions of the noble Viscount, Lord Hanworth, on carbon-neutral air fuels are not directly covered by my speaking notes, so I shall write to him with more details in due course. It overlaps with another department, so I will write to him and copy it to all Members of the Committee.

I hope that on the basis of my reassurances noble Lords will not press their amendments.

[Lord Lennie (Lab)]

I thank the Minister for her response. First, on what my noble friend Lady Liddell had to say, it is what she did not say about what happened at the party that we want to know. If she gets the opportunity, perhaps she could enlighten us more.

In response to the noble Lord, Lord Teverson, I say that we certainly do not intend direct air capture to be a way of screening climate change sceptics; rather, it is an acceleration of addressing our climate needs. However, I understand that there will be sceptics who would hide behind it.

The Minister’s response to my amendment seemed to be that the Government would take things on a case-by-case basis as and when they arise and make a judgment on the inclusion or not of carbon usage. She said that DAC was under consideration for the future. Well, the point of the amendment is to try to future-proof this piece of legislation for the mid to long term and I would have thought that including it would be quite within the Bill’s remit. With those comments, I beg leave to withdraw my amendment.

Amendment 39 withdrawn.

--- Later in debate ---

[Lord Callanan (Con)]

I will speak to government Amendments 41 and 63 standing in my name. Amendment 63 will enable the Gas and Electricity Markets Authority and the Northern Ireland Authority for Utility Regulation to enforce hydrogen levy requirements imposed on relevant Great Britain and Northern Ireland market participants respectively.

The existing enforcement provisions in the Bill enable regulations to make provision for the levy administrator to, for example, issue notices and charge interest on late payments in respect of market participants who default on levy payments. Amendment 63 complements the existing enforcement provisions. Crucially, it ensures that regulations can make provisions for more robust forms of enforcement and enables enforcement under the terms of the licences held by market participants obliged to pay the levy, such as the possibility of licence revocation. It is critical that the levy is supported by a suite of enforcement measures. This will help reduce the risk of defaults on levy payments and help ensure that the levy administrator can collect the money required to fund the hydrogen business model and cover related costs.

Amendment 41 ensures that regulations made under this new clause will be subject to the affirmative resolution procedure, to ensure sufficient parliamentary scrutiny of these more robust enforcement arrangements. Therefore, I hope they will be acceptable to the House. I beg to move.

[Lord Lennie (Lab)]

My Lords, these government amendments are evidence of the rather chaotic state of the Bill as it has come to us. It is long—300-plus pages, 13 parts, et cetera—and missing this from the original drafting is an oversight by the Government that needs some explanation. Having said that, the amendments allow for an enforcement provision under the new regulations and for these to be subject to the affirmative procedure. We welcome that scrutiny and the ability to enforce regulations that are made. These amendments will also allow revenue support regulators to make provision for the relevant requirements found in the pre-existing enforcement regimes win the Gas Act 1986 and the Electricity Act 1989, as well as, as the Minister said, regulations regarding Northern Ireland. I would be interested to know when the existence of these pre-existing requirements was discovered. I look forward to his response.

[Lord Callanan (Con)]

The noble Lord is correct that a lot of drafting work went in. There is always limited OPC drafting time in government. It is regrettable that these clauses have had to be added, but I hope that I have provided sufficient explanation for them. The detailed levy design is pending, of course, but they include the enforcement arrangements for the levy. It is crucial that we allow for regulations to make provision for a range of enforcement measures. This provision simply allows regulations to enable the Gas and Electricity Markets Authority and the utility regulator to use their existing enforcement powers to ensure that relevant market participants comply with the obligation to pay the levy. Participants in the energy market are already very familiar with these arrangements.

--- Later in debate ---

[Lord Teverson (LD)]

My Lords, I begin by making it quite clear that my energy storage interests are not around long-term storage or retail storage.

I absolutely support the amendments put forward by my noble friends, but I will not talk about them. Instead, I will follow up on the amendment tabled by the noble Lord, Lord Moylan, and relate it to some of the discussion that took place earlier today in the House around storage, because gas storage is really important at this present time, and it will continue to be in future. I like the way—through a percentage or whatever we use—that we can see a relevant ratchet downwards, as we would expect. However, what alarmed me earlier today was that, in terms of current storage, we appear to be in the hands of independent directors of independent companies that have responsibility to their shareholders under the law, but not to the energy security of the country. That was very clearly stated by the Minister in terms of the decision to turn off the Rough facility in 2017. As I said at the time, if that was the case then, I see no reason why that is not also the case in future; there seemed to be no proposal by the Government to change that situation. I am interested to hear the Minister’s response to that part of my original question.

I will also go back to what the noble Baroness, Lady McIntosh of Pickering, said, because part of the Minster’s earlier answer was that our storage is the gas we have in the North Sea. But we all know that that store is going down, and I certainly would not, from these Benches, resist trying to increase that in the short term during the energy crisis to ensure that our energy is there—the situation would be different in the medium and long terms. That flow is going down and our imports are going up. I do not know if these two years were particularly representative, but the last figures from the Minister’s department said that, in 2020, we imported £5 billion-worth of gas. A year later, that went up to £20 billion-worth of imports of gas—a quadrupling. That was not all because of a price increase at that time, most of which has happened in 2022.

Another statistic reveals that, while we think we have multiple sources, 75% of imports came from one country, which is Norway. Norway is a dependable friend of the United Kingdom; we would not argue otherwise. But we must be clear that Norway’s bigger customer is Germany. Germany and the other European countries which import gas from Norway are probably more desperate—this is likely not the right phrase to use—for that resource than we are. As I said, I very much support the outline of the amendment tabled by the noble Lord, Lord Moylan, and ask the Minister what security we actually have, and for how long, over our supplies—that is, the 75% of imports that we have from Norway. What is our legal entitlement to that flow into the future?

[Lord Lennie (Lab)]

My Lords, the amendments from the noble Lord, Lord Oates, are very welcome and they plug a gap in the Energy Bill. Amendment 50 facilitates the changes proposed by allowing the Secretary of State to

“designate the person to be a counterparty for long duration energy storage revenue support contracts.”

Amendment 51 introduces a new clause which allows the Secretary of State to

“direct a long duration energy storage counterparty to offer to contract with an eligible person”.

Clauses 59, 61 and 63 already allow designation of counterparties for transport and storage, hydrogen production and carbon capture revenue support contracts, and Amendment 50 simply replicates this for long duration energy storage. Similarly, Clauses 60, 62 and 64 already allow the Secretary of State to direct counterparties to offer to contract, and Amendment 51 replicates this for long duration energy storage.

The amendments define long-duration energy storage revenue support contracts as being

“between a long duration energy storage counterparty and the holder of a licence under section 7”

and, as ones

“entered into by a long duration energy storage counterparty in pursuance of a direction given to it under section 60(1).”

This fills a big gap for long-duration energy storage. According to the Government, longer-duration storage—access across days, weeks and months—could help to reduce the cost of meeting net zero by storing excess low-carbon generation for longer periods of time, thereby helping to manage variation in generation, such as extended periods of low wind. This in turn could reduce the amount of fossil-fuel and low-carbon generation that would otherwise be needed to optimise the energy output from renewables.

Long-duration energy storage includes pumped storage as well as a range of innovative new technologies that can store electricity for four hours to supply firm, flexible and fast energy that is valuable for managing high-renewables systems. Introducing long-duration energy storage in large quantities in Britain by 2035 can reduce carbon emissions by 10 megatonnes of CO₂ per annum, reduce systems costs by £1.13 billion per annum and reduce reliance on gas by 50 TWh per annum. That seems to me worth consideration in this Bill.

Amendment 225 in the name of the noble Lord, Lord Moylan, which has general support around the House, requires the Government to produce a strategy for the storage of gas for domestic consumption. This would see the construction and operation of gas storage facilities capable of holding 25%, although it could be more—it could be 100%—of forecast domestic consumption each year beyond 2025. While agreeing that UK gas storage is currently small, which may have left us exposed to higher prices and shortages thus far, is it the solution to the long-term energy supply problems that we may face? It may well be that we need an immediate expansion of gas, but whether it is the long-term solution to our energy supply is open to some question. The UK currently stores enough gas to meet demand over four or five winter days, which is clearly not enough. But the new Chancellor said, when he was the Business Secretary, that the answer to mitigating a quadrupling of the gas price in four months was to get more diverse sources of supply, and more diverse sources of electricity, through non-carbon sources. So there is some doubt about the long-term viability of increasing gas storage.

Amendment 240 from the noble Lord, Lord Foster, would establish a new clause to store energy generated by solar panels in the list of energy-saving materials that are subject to zero-rate VAT. He had the example of his friend in the south-west. Modelling from Cornwall Insight’s view of the GB power market out to 2030 has shown that between 2025 and 2030 the Government must spend almost one-fifth of their total energy technologies investment, which includes solar, wind, nuclear and carbon capture and storage, on energy storage batteries, if we are to meet renewable targets and stabilise the energy market. Latest data estimates that almost 10% of grid capacity will be provided by battery storage by 2030, at an estimated cost of £20 billion. So, considering both the need and the cost of this, the amendment seems a sensible proposal to encourage the market to take up some of the burden.

[Lord Callanan (Con)]

I thank all noble Lords for participating in what has been a fascinating debate on an important subject, very much building on the discussion that we had earlier this afternoon. I shall come on to the issue of gas storage—a popular topic of the day—a bit later.

I start with Amendments 50 and 51, tabled by the noble Lord, Lord Oates. Long-duration energy storage covers a wide range of technologies, and the Government are looking at the need for revenue support for these separately, as they all face different challenges and solve different problems. While I commend the noble Lord’s intentions, I put it to him that these amendments are premature at this stage.

In the case of electricity storage, I reassure the noble Lord that we are committed to developing policy enabling investment for large-scale, long-duration electricity storage by 2024, as we have set out in our response to the call for evidence. As noted by the noble Lord, Lord Oates, we recognise that these technologies face significant barriers to deployment under the current market framework, due to their long build times, the high upfront costs, and the lack of forecastable revenue streams. Similarly, in the case of hydrogen storage, the 2021 UK hydrogen strategy set out our ambitions in this area.

More recently, and in recognition of the important role that hydrogen storage is expected to play in the hydrogen economy, we committed in the 2022 British energy security strategy to design hydrogen transport and storage business models by 2025. Indeed, we published a consultation on these matters in August. It is my contention that adding these clauses to the Bill now would prejudge the outcomes of the policy development which, as I hope noble Lords recognise, is already well under way.

--- Later in debate ---

[Lord Teverson (LD)]

The history of contracts for difference is longer than I thought; I thank the noble Baroness for mentioning that. They became a big thing in the last Energy Act during the coalition Government and have been amazingly successful. I have to admit that I did not realise that this issue was quite so significant, but it is interesting that, given the financial investment required for offshore wind farms and the time they often take to implement and build, this is a case where the risk goes up for the financial investor, as opposed to a low-risk contract for difference. I am therefore also interested to understand from the Minister whether these businesses are just delaying until they see the lay of the land and whether they still have those options, because there is that risk-reward ratio.

I very much support the intention of this amendment, but the energy industry has also talked about contracts for difference being a way forward even in the fossil fuel industry, and a way that we could decouple power prices from gas prices. It may be that the Government are not doing anything in that area, but I am interested to understand whether that is something the department is investigating as a way forward on that decoupling.

Contracts for difference are a fantastic invention. As the Minister said, at the moment they are bringing good money back into the public sector—technically into the counterparty company, but effectively into the public finances. I very much support the motivation of this amendment.

[Lord Lennie (Lab)]

My Lords, we are also very supportive of contracts for difference and of this attempt to ensure that contracts entered into are adhered to. I was not quite sure whether the noble Baroness, Lady Worthington, had the total number of these failures to enter the contracts, other than the three she cited, which is probably enough. Maybe the Minister could help with that if she does not have that information.

The only thing that concerns me is that, although I cannot think of what it could be, there might be some reasonable exemption for not signing up. However, apart from that, it seems to me entirely sensible to tighten this obligation.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Baroness, Lady Worthington, and the noble Lord, Lord Howell, for their amendments. I say at the outset that the CfD model will remain an important tool in the armoury of financing options to encourage investment in green energy, although I understand that the point of these amendments is to preserve its integrity.

Amendment 61 seeks to make the signing of a contract for difference—known as a CfD—mandatory for a renewable electricity project that has successfully bid for one in a competitive CfD allocation round. I point out, however, that the Energy Act 2013 already contains, in Section 14(2)(d), powers very similar in effect to the amendment. Section 14(1) of the 2013 Act provides for a CfD counterparty, acting in accordance with provisions made by regulations, to offer to contract with an eligible CfD generator. Section 14(2) of the Act allows for regulations to be made that make further provision about an offer to contract, including, at Section 14(2)(d), provision about what is to happen if the eligible generator does not enter into a CfD as a result of a contract offer. Successful applicants for a renewable electricity CfD are expected to enter into a contract with the Low Carbon Contracts Company if offered one following a CfD auction. Those who do not are excluded under Regulation 14 of the Contracts for Difference (Allocation) Regulations 2014, as amended, from submitting an application at the same site for a specified number of future CfD allocation rounds—an “excluded site”. The 2014 regulations were made under the powers in Section 14 of the Energy Act 2013.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

In law, the Government have the power to use them. I am afraid I am not able to comment on what action we might take on the three specific cases which the noble Baroness, Lady Worthington, mentioned, but as I said, I will take that back to the department and write to noble Lords to set out whatever action is being proposed.

[Lord Lennie (Lab)]

Does the Minister know of any further cases, other than the three that have been cited? What total caseload are we talking about?

[Baroness Bloomfield of Hinton Waldrist (Con)]

My briefing suggests that only three small projects totalling 41 megawatts have refused to sign a CfD contract, but that does not sound like a big enough totality to incorporate three large wind farms. I am afraid I do not have any further details on that at this moment.

Amendments 59 and 60 similarly seek to make the signing of a revenue support contract mandatory for a firm which has successfully bid for it through an allocation process put in place under Clauses 68 to 74. Clause 72 provides for a hydrogen production counterparty and carbon capture counterparty, acting in accordance with provision made by regulations, to offer to contract with an eligible low-carbon hydrogen producer or eligible carbon capture entity respectively in specified circumstances. Clause 72(3) provides the Secretary of State with a power to make further provision in regulations about an offer to contract made under this clause. Subsection 3(d) sets out that this may include provision about

“what is to happen if the eligible low carbon hydrogen producer or eligible carbon capture entity does not enter into such a contract as a result of the offer.”

As I have explained, a similar power in the Energy Act 2013 has been exercised to introduce the non-delivery disincentive for the CfD regime, which has been very effective in discouraging non-compliance across the four CfD allocation rounds.

We are considering how to evolve our approach towards more competitive allocation processes under Clauses 68 to 74 for the industrial carbon capture business models. Work is under way to develop the possible design of a more competitive allocation process for the hydrogen business model, including the offer to contract process. I therefore ask the noble Baroness and the noble Lord not to press Amendments 59 and 60, but again thank them for helping to test the robustness of the Government’s decarbonisation ambitions.

I hope I have been able to reassure noble Lords and that, with the offer to write with further details on the wind farms, they feel able to withdraw their amendment.

--- Later in debate ---

[Lord Teverson (LD)]

I thank the Minister for that. When I read the Bill, I looked at Chapter 2, entitled “Decommissioning of carbon storage installations”. My first question was: is not carbon storage all about being permanent? How the heck do you decommission a big hole under the North Sea and move all the carbon dioxide somewhere else? I do not want to understand the detail of this—if the Minister wants to accuse me of being thick or stupid about this, I can take it—but what installations for carbon capture and storage will be decommissioned and where the carbon will go. I should like to understand the scenarios so that I can understand how this part of the Bill works.

[Lord Lennie (Lab)]

I should also be interested to know that. First, may I say to the new Leader of the House that I would strongly recommend the reappointment of the noble Lord, Lord Callanan. That probably does him no favours at all, but that is just how it is. Secondly, I was going to set out a hypothetical situation about an oil and gas plant—

[The Lord Privy Seal (Lord True) (Con)]

If I may, I should like to say that I said earlier in the House that I would value good relations across the House, but the noble Lord must not take it too far by damning my Ministers with praise from the Labour Party.

[Lord Lennie (Lab)]

Okay, do not reappoint him. What can I say? I was going to set out a hypothetical situation about an oil and gas plant that had been decommissioned, but not fully, and was to be recommissioned and transferred to CCUS usage. I do not know whether that will never be possible, but who knows? It is a complicated situation and I wanted to know where the Minister thought responsibility would lie. However, I am pleased to say that he has pointed us towards the 1998 Act, the 2008 Act and some other Acts, so somewhere in there lies an answer. It would seem sensible to draw together whatever is the answer to the question and put it in the Bill, to update it. The Minister can come back on that and to the question of the noble Lord, Lord Teverson, about whether that will ever be the situation.

As for the other government amendments to the Bill, I have again to make the point that this Bill of 350-plus pages, three parts and however many clauses is surely sufficient to cover the energy circumstance. As I said in my introduction yesterday, the Bill is a mix of all sorts of things without a coherent theme. If it had a coherent theme, it might well have covered these matters in the first place, but that is really for then, not for now.

[Lord Callanan (Con)]

I thank noble Lords, and let me apologise to the Committee for the number of government amendments. They are quite technical, and the Bill is obviously very large. It was drafted at pace, and it was not possible with the resource we had available to get all the details finalised, which is why there are a number of technical amendments.

The answer to the question of the noble Lord, Lord Teverson, which is a very good one at first sight, is that, of course, when the storage facilities are full, the storage facilities themselves are not decommissioned. They are used, but all the storage infrastructure—pipework and all the associated engineering, platforms, injection facilities, et cetera—will need to be decommissioned. I am sure the Liberal Democrats fully support the “polluter pays” principle, whereby someone who has benefited from a facility should be made to bear the costs of decommissioning it, which is why we are setting up a fund to do that. I reassure him that we do not decommission the actual sites—as he said, it would be quite difficult to extract the carbon dioxide from them to put it somewhere else—but they require monitoring, and the associated infrastructure will need to be decommissioned, which is why the fund is being established.

Low-Income Families: Energy Cost Support

Lord Lennie Excerpts

Tuesday 6th September 2022 Lords Chamber

[Lord Callanan (Con)]

The right reverend Prelate is not correct about that. It depends on which energy companies he is talking about: many of the energy suppliers have gone bankrupt over the last year or are making very marginal profits. Some producers, often in other parts of the world, are making very large profits. There are issues to do with some of the early renewable power obligation companies, which are also doing well. Under the latest contracts for difference schemes, that money is being recouped from the taxpayer. In all of these things, it is easy to make these observations but of course, it is an overly complicated situation.

[Lord Lennie (Lab)]

My Lords, following on from the right reverend Prelate’s question, figures from the University of York suggest that four in five households will face fuel poverty by January and millions of people are struggling to make ends meet. The i newspaper reported yesterday that the new PM is following the pattern of the former PM and doing a screeching U-turn, now saying that direct intervention in the fuel crisis is necessary and following Labour’s proposal to freeze energy bills. Can the Minister tell us if and when we can expect this to be delivered?

Energy Bill [HL]

Lord Lennie Excerpts

Committee stage
Monday 5th September 2022 Lords Chamber

Moved by

[Lord Lennie]

1: Before Clause 1, insert the following new Clause—
“Part A1Purpose and strategy and policy statementPurpose (1) The principal purpose of this Act is—(a) to increase the resilience and reliability of energy systems across the United Kingdom,(b) to support the delivery of the United Kingdom’s climate change commitments, and(c) to reform the United Kingdom’s energy system while minimising costs to consumers and protecting them from unfair pricing. (2) In performing functions under this Act, the relevant persons and bodies must have regard to—(a) the principal purpose set out in subsection (1),(b) the Secretary of State’s duties under sections 1 and 4(1)(b) of the Climate Change Act 2008 (carbon targets and budgets) and international obligations contained within Article 2 of the Paris Agreement under the United Nations Framework Convention on Climate Change,(c) the desirability of reducing costs to consumers and alleviating fuel poverty, and(d) the desirability of securing a diverse and viable long-term energy supply. (3) In this section “the relevant persons and bodies” means—(a) the Secretary of State;(b) any public authority.”Member's explanatory statement
This amendment, along with other new clauses before Clause 1, add a new Part setting out the purpose of the Bill and a requirement for a Strategy and Policy Statement in line with this Act.

[Lord Lennie (Lab)]

My Lords, Amendments 1 to 4 and 245, along with other new clauses before Clause 1, add a new part setting out the purpose of the Bill and a requirement for a strategy and policy statement in line with the purpose of the Act.

The context for this is threefold. First is the cost of living crisis: the energy cap has risen to £3,549 a year for an average household, and National Energy Action, of which the noble Baroness, Lady McIntosh, is chair, predicts that the number of households in fuel poverty will rise to 8.9 million.

The second is net zero: the Conservative leadership candidates—including Liz Truss, the new Prime Minister—ran away from this during the recent campaign. The High Court found that the net-zero climate strategy is inadequate, and the Climate Change Committee found that credible plans existed for only 39% of emissions, citing “major policy failures” and scant evidence of delivery. The 2021 International Energy Agency report found that the current commitments will not achieve net zero on schedule as they fall well short of what is needed to reach net zero by 2050.

The third is energy security: gas prices are expected to surge to record highs this week after the Nord Stream pipeline shut down. They could reach 800p a therm, and on Friday of last week they were 320p. European prices have risen by nearly 400% over the past year already, and the UK relies on gas for approximately 40% of its power generation—even more on the coldest days when demand increases and wind generation is low. The 2017 BEIS report included a scenario of the complete cut-off of Russian gas and concluded that the UK could see significant unmet demand if the cut was prolonged and continental European countries paid whatever was necessary to keep gas flowing. In the most extreme scenario, this could result in 28% of demand being unmet and lead to cut-offs or rotations of supply.

The Bill, as we said at Second Reading, is a pick and mix of things thrown together; it lacks ambition and an overarching theme designed to tackle these issues. There is no reason to believe that the current energy crisis will not happen again as the impact of global warming is a long-term issue.

Consequently, our amendments would, first, set out a purpose for the Bill by increasing resilience and reliability of energy systems across the UK; support the delivery of the UK’s climate change commitments; and reform the energy system. Secondly, they would bind the Secretary of State and the public authorities to these purposes, to our international commitments on climate change, and to the desirability of reducing costs and alleviating fuel poverty and securing a diverse and viable long-term energy supply. They would require the Secretary of State to designate a statement as a strategy and policy statement with regards to the purpose of the Act and require the Secretary of State to review both the strategy and the policy on a five-yearly basis. This would, in turn, force successive Governments into long term thinking, widen the impact and ambition of the Bill to address both short- and long-term issues, and help to ensure that, for the future, action does not come either too late or too little to solve a crisis.

I turn briefly to the other amendments in this group. Amendment 5 in the name of the noble Lord, Lord Moylan, adds a new clause requiring an assessment of the cost of achieving net zero and contrasting this with achieving net zero by later dates. Not achieving net zero by 2050 would be a breach of our international agreements and would be hugely damaging to health, livelihoods and human security, as well as our reputation on the global stage. The cost feasibility of not acting by 2050 and leaving net zero until 2065 or 2080 would be incomparable.

Amendment 6 in the name of the noble Baroness, Lady McIntosh, makes energy security the primary objective of the Bill, and while we agree with the importance of this objective, we would point to the wider focus our amendments require of the Bill. Amendment 7 in the name of the noble Lord, Lord Ravensdale, focuses on increasing the resilience and reliability of energy systems, supporting the UK’s climate change commitments, and reform of the UK energy system while minimising costs to consumers—protecting them from unfair pricing—and requires the Secretary of State to report annually to Parliament on these matters. This links in well with our amendments.

Amendment 231 in the name of the noble Lord, Lord Moylan, probes the intentions behind the Government’s proposal to alter the current pricing system of wholesale electricity based of the marginal cost of the last source of supply. I would be interested to see what lies behind the Government’s rationale for this change. Amendment 242 in the name of the noble Lord, Lord Ravensdale, sets out a national electrification and power plan; this links in with opposition thinking.

According to McKinsey, renewables could produce more than half of the world’s electricity by 2035 at lower prices than fossil fuel generation. On 18 May 2022, the EU presented the REPowerEU plan to end its dependence on Russian fossil fuels and tackle the climate crisis through energy savings, diversification of energy supply and accelerated rollout replacement of fossil fuels in homes, industry and power generation by renewable energy sources. The EU plan includes a massive scaling up and speeding up of renewables—solar, heat pumps, hydrogen, biomethane—which is not present in the Bill, and the EU plan suggests that replacing coal, oil and natural gas in industrial processes will reduce greenhouse gas emissions and strengthen security and competitiveness. Energy savings, efficiency, fuel substitution, electrification and an enhanced uptake of renewable hydrogen, biogas and biomethane could save up to 35 bcm of natural gas by 2030 on top of what is predicted under the Fit for 55 proposals. The UK must not be left behind. We must scale up our ambition. I beg to move.

--- Later in debate ---

[Lord Callanan (Con)]

I do not think it is important to do that at this stage; we have published the consultation, we are closely analysing responses, as the noble Baroness will understand. It is a difficult area, it is a complicated area, there are a number of potential ramifications, and we think it is worthy of consideration. If we took a power now, that might have a very destabilising effect on the market and on the amount of investment that is flowing into many of the sectors, so the Government’s position at the moment is that we do not think that is necessary or desirable.

I reassure noble Lords that the addition of electrification to the Energy Bill is also unnecessary. The net-zero strategy sets out the Government’s view on how electrification can enable cost-effective decarbonisation in transport, in heating and in industry—to that extent, I agree with the noble Baroness, Lady Worthington, and the points that she made—along with our approach to deliver reliable, affordable and low-carbon power. The energy security strategy accelerated, as I am sure the noble Baroness is aware, our ambitions for the deployment of renewables for nuclear and for hydrogen. I can assure noble Lords that the Government will never compromise our security of supply: that remains our primary consideration. But our understanding of what the future energy system will look like and the level of the demand that we will need to meet through electrification will essentially and inevitably evolve over time. So, we are not targeting a particular solution, but we rely on competition to spur investment in the different technologies and new ways of working, and new technologies such as more efficient batteries et cetera are coming onstream every day. We will closely take all these matters under consideration. We take the view that the Government’s role is to ensure the market framework is there and that encourages effective competition and, at the same time, delivers a secure and reliable system.

Finally, let me thank the noble Lords, Lord Howell and Lord Teverson, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Jones and Lady Hayman, for their valuable contributions to the debate. I assure my noble friend Lord Howell that we are working internationally with the US, with the EU and with our other partners to produce a secure and reliable energy system together. In response to the noble Viscount, Lord Trenchard, I am sure he will be pleased to hear that through the £385 million advanced nuclear funds, we are providing funding to support research and development for precisely the small modular reactor designs that the noble Viscount wishes to see, and we are progressing plans to build an advanced modular reactor demonstration by the early 2030s at the latest. Therefore, with the reassurances that I have been able to provide, I hope that noble Lords will not press their amendments.

[Lord Lennie (Lab)]

My Lords, first, I apologise for not thanking the Minister for meeting us earlier today; that was helpful. To answer one or two points, the noble Viscount, Lord Trenchard, asked about what Boris Johnson said when he was Prime Minister—up to yesterday, or today. He raised questions about power stations being built and the figure of one a year for however many years necessary, and not being sure what power stations there were. The PM was never really good on detail and I think this proves that point. That does require some clarification.

The bigger point raised by the noble Lord, Lord Howell, and the Minister was in relation to the preambles. They asked: why these preambles? They are a combination, if you like, of the preambles to the climate change and sustainability Act and the Energy Act 2013, as the Minister pointed out. They seek to give some definition, some guidance, to what the Bill is intended to achieve, as opposed to its rather rambling, ongoing, imprecise nature. It is not so much that the Bill is objectionable; it is just not adequate to achieve what it intends.

We will look at this before Report. With those few comments, I beg leave to withdraw my amendment.

Amendment 1 withdrawn.

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, Amendments 11,12 and 13 in my name would all strengthen the relationship between Ministers and the economic regulator by insisting that the Secretary of State and the economic regulator are bound by the listed regulatory principles and the need to contribute to achieving sustainable development rather than just having regard to them. Further, they would oblige a Minister to be bound by their duties as a Minister, as opposed to just having regard for them. They would also require the economic regulator to be bound by the need to assist the Secretary of State, compliant with its duties and targets. It is not sufficient to have regard to these matters; it is important to be bound by them. Can the Minister say what “have regard to” means if not to be bound by them?

Amendments 15 and 16 espouse that the Bill does not specifically include carbon capture usage. To add to the example given by the noble Baroness, Lady Worthington, in January 2021, the major US oil company Chevron announced that it had made investments in the San Jose-based corporation Blue Planet Systems—then a start-up—which manufactures and develops carbon aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations. Blue Planet Systems manufactures carbon-based building aggregate from flue-gas-captured CO₂. These amendments aim to encourage the use of captured carbon as opposed to its storage.

[Lord Callanan (Con)]

My Lords, I thank everyone who has contributed to this short debate. Addressing the amendments in turn, I will start with Amendment 8, tabled by the noble Baroness, Lady Liddell, and my old friend the noble Lord, Lord Foulkes, who is very conciliatory today—I am suspicious; something has happened to him over the summer, but I am sure that we will get the old noble Lord, Lord Foulkes, back before we get much further into the debate.

This amendment seeks to amend the principal objective applying to the Secretary of State and the Gas and Electricity Markets Authority in respect of consumer protections. Under the current drafting of this principal objective, it is for the Secretary of State or the economic regulator to protect the interests of consumers who they consider may be affected by regulatory decisions. This drafting is intended to ensure that the economic regulator and Secretary of State have discretion as to the consumer impacts that are taken into account. While the noble Lord’s and the noble Baroness’s amendment is intended to ensure that only actual or likely impacts are taken into account, we consider that the existing drafting already provides for this. Therefore, I submit that the amendment is unnecessary.

I turn next to Amendment 9, which is also in the name of the noble Baroness, Lady Liddell, and the noble Lord, Lord Foulkes, joined on this occasion by the noble Baroness, Lady Bennett. The amendment as drafted would place an additional principal objective on the Secretary of State and the economic regulator to assist in the delivery of the net-zero objective. I know that we have had this discussion on a number of Bills, but I will reiterate that, under the Climate Change Act 2008, the Secretary of State is already bound by law to ensure that the targets to reduce greenhouse gas emissions are met.

Under Clause 1(6), the economic regulator is required to have regard to the need to assist the Secretary of State in complying with his duties to achieve carbon emissions reduction targets and to have regard to these targets in each of the devolved Administrations. I therefore submit that the economic regulator is already required to take these net-zero targets into account in its regulatory determinations.

Next, I turn to Amendment 10, proposed by the noble Lord, Lord Teverson. This amendment seeks to ensure that cross-subsidy of carbon dioxide transport and storage activities, from users of other networks, is avoided. Clause 1 of the Bill establishes the Gas and Electricity Markets Authority as the economic regulator of carbon dioxide transport and storage. It also establishes the principal objectives and general duties for the Secretary of State and the economic regulator in the exercise of their respective functions in relation to the economic regulation of carbon dioxide transport and storage.

The principal objectives in Clause 1 include protecting the interests of current and future users of the network and those of consumers. In relation to the regulation of gas and electricity, the Secretary of State and the Gas and Electricity Markets Authority remain bound by the principal objectives to, respectively, protect the interests of current and future consumers in relation to gas conveyed through pipes, and in relation to electricity conveyed by distribution systems. Different principal objectives are appropriate to reflect that the objectives for carbon dioxide transport and storage networks are different from those of the gas and electricity networks.

Under the provisions in the Bill, the economic regulator should be able to take into account, in its decision-making in relation to CO₂ transport and storage activities, any impacts on users of gas and electricity networks that may arise from those decisions. I hope that the noble Lord is sufficiently reassured on this point.

I move on to Amendment 11, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake. This seeks to ensure that the Secretary of State and the Gas and Electricity Markets Authority are bound by the principles of regulatory best practice and the need to contribute to the achievement of sustainable development. Clause 1 sets out the principal objectives and general duties of the Secretary of State and the economic regulator. The principal objectives are complemented by statutory duties on the Secretary of State and the economic regulator to have regard to certain matters. This includes having regard to principles of regulatory best practice and the need to contribute to the achievement of sustainable development. To have regard to these matters means that the Secretary of State or the economic regulator, as the case may be, must give genuine attention and thought to these matters.

In a complex sector with varying objectives that can sometimes conflict, it is important that the regulator’s duties strike the right balance between setting out all relevant issues and considerations, while giving some necessary discretion to the regulator to balance those considerations in its decision-making process and to have sufficient authority and independence in that decision-making. I hope that explains the point for the benefit of the noble Lord, Lord Lennie.

The formulation of the statutory duty as proposed by the noble Lord and the noble Baroness in our view risks compromising what is quite a delicate balance. The greater the number of statutory duties, and the more binding their nature, the more difficult the act of balancing the different, possibly conflicting, duties becomes. I hope that provides sufficient reassurance.

Amendments 12 and 13, again from the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, also seek to amend the statutory duties applying to the Secretary of State and the Gas and Electricity Markets Authority to ensure that the greenhouse gas emissions reduction targets under the Climate Change Act 2008 are a binding consideration in regulatory determinations. In relation to Amendment 12, as I have already set out, under the Climate Change Act the Secretary of State is already bound by law to ensure that the targets to reduce emissions are met. We therefore do not consider that this amendment is necessary.

--- Later in debate ---

[Lord Teverson (LD)]

My Lords, I welcome very much that we have moved on to the area of enforcement because, if there is one thing that is true in anything to do with the environment, we make legislation—very effectively, often—but our enforcement does not work, because of either lack of will or lack of resources.

I would like assurance from the Minister, if possible, that the regulator will be resourced enough—I would be interested to know what conversations have taken place over this—to make sure that enforcement does take place. Of course, for enforcement to happen, particularly in physical facilities, there needs to be inspection. I would be interested in understanding who will be inspecting and what the resource level is likely to be.

I come back to a very good point made by the noble Baroness, Lady Blake of Leeds, on safety, which was not answered by the Minister earlier. CO₂, although not toxic like carbon monoxide, is a gas that, if exposed, can be suffocating. I would like to understand how enforcement on subsea storage facilities can take place.

Enforcement is good, but my questions are these: how will it be resourced, what is the programme for it and can it happen sufficiently to ensure safety?

[Lord Lennie (Lab)]

My Lords, the government amendments appear to correct an oversight in the Bill. If noble Lords are confused then so am I. I am not entirely sure what the Minister was saying, but it appears to me that there was a stage missing in the original drafting of this Bill and the attempt now is to put in that stage—which is, in effect, a final warning to licence holders to act in specific ways in order to become compliant. If that is right, then I understand it and I do not oppose it, but I want to make sure that I understand correctly what the Government are trying to do. If I am right then, other than to point out the original omission, we do not oppose these measures; we just want clarification of what is being put into the Bill.

[Lord Callanan (Con)]

I am happy to provide the reassurance that the noble Lord, Lord Lennie, asks for. It was simply a matter where, originally, we intended to take a power to do this through secondary legislation but, as we got to a later stage of drafting on the Bill, we thought that it would be more appropriate to put it in primary legislation. That is normally something that the House asks us to do. We were, on this occasion, trying to pre-empt some of the points that may be made by Peers to say that we should not do so much under powers and secondary legislation and should put it in the Bill—that is in fact what we are doing.

With regard to the point made by the noble Lord, Lord Teverson, on resourcing, it is very early days—we have not even set up the regulator yet—so I cannot give him any specific figures on what resourcing the regulator will have. The Treasury will no doubt want to have considerable input into this, but we will want to make sure that it is appropriately resourced and that we have the appropriate technical abilities, technical inspectors and so on to make sure that this activity is appropriately licensed and enforced and, of course, is safe for operators, personnel and the public.

Energy Bill [HL]

Lord Lennie Excerpts

2nd reading
Tuesday 19th July 2022 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I thank the Minister for his detailed introduction and for the meeting we had yesterday about the Bill. I also thank all other noble Lords who have taken part in the debate.

We began with the noble Lord, Lord Bruce, who gave us a bit of a personal history. It is unusual to find a Scot who has not been elected opposing oil and gas in Scotland these days—that is the way it is. The noble Baroness, Lady Hayman, talked about onshore wind, Ofgem having a net-zero remit and the local community generation of fuels, which we would certainly support.

We had a warning from the noble Lord, Lord Howell. With his international experience, he was disappointed in the Bill, warning of worse to come and the way in which renewables are seen to replace fossil fuels. The noble Lord, Lord Whitty, spoke of the gravity of the situation and of the Bill not standing up to that, while welcoming the ISOP and CCUS; and the noble Baroness, Lady Sheehan, talked of CCUS not working at scale and being insufficient to deal with the carbon capture issue.

The right reverend Prelate the Bishop of Carlisle welcomed the Bill—he was a bit of a sore thumb among those who spoke—and all three pillars of it, which is good news. He also talked about local generation and carbon capture. The noble Lord, Lord Moylan, reminded us that he is a big advocate for the gas industry, based on cost. I do not know about the detail of his analysis, but he warned that renewables will be more expensive and unaffordable. My noble friend Lord Hanworth predicted social unrest because of the price of fuel and energy costs. The noble Lord, Lord Ravensdale, talked about the trilemma he is in between the three parts of the Bill. The noble Baroness, Lady Bennett, warned about local suppliers, onshore wind, efficiency and fusion.

The noble Baroness, Lady McIntosh, talked about local sources of waste energy, generating for local use and transmission. She criticised the use of overhead lines for the transmission of electricity and the 30% waste it produces. My noble friend Lord Haworth reminded us of the Bill’s size, expressed disappointment at its overall effect but welcomed the ISOP. The noble Baroness, Lady Boycott, welcomed the Bill but with a lot of reservations about the effects it will have and the high costs. She was very much anti-hydrogen, although the hydrogen pilot has yet to be gone into in detail. The noble Baroness, Lady Jones, gave us a rant: we are doomed, there is no support and there is nothing on onshore wind. Then we finished with the noble Lord, Lord Teverson, who thanked the former Energy Minister from the Liberal party, Ed Davey—what happened to him?—for giving us the 2030 Bill, and welcomed certain aspects of the Bill in his presentation.

The Bill has been a year in the creation so we welcome its publication, but despite its length—300-plus pages, 243 clauses, 13 parts and 19 schedules—it represents a bit of a missed opportunity to address the catastrophe facing millions of ordinary, hard-working families who face soaring energy bills. It does not meet the scale of the crisis. Having taken a year, it is a bit of a disappointment and misses the target of the cost of living crisis. The Bill does not go far enough in establishing new green energy sources, nor in its energy-efficiency measures, which are at best not a leap from where we are now.

The Bill should have had achieving net zero woven into every measure it proposes, not run away from it. One of the leadership candidates described net zero as “unilateral economic disarmament”. I think she is no longer a candidate, but I do not know whether she has revised her view of net zero more in line with what policy should be.

The Bill is a missed opportunity to bring forward energy-efficiency measures, which are desperately needed and should be the starting point of the Bill. Never mind the green energy sprint towards net zero and helping with the cost of living crisis that my noble friend Lady Blake referred to in her opening speech—that sprint seems to be more of a gentle walk and the crisis merely a blip. A decade of failed energy policy has left energy bills too high and our energy system too weak.

What is remarkable in this long Bill, divided into three key pillars, is what is missing. It will not be a surprise to the Minister that this is how we feel, as these matters have been raised continuously over the recent past. Where is the urgent help needed to help with soaring energy costs, including the delinking of low-price renewables from the high price of gas? Where is any mention of onshore wind, the cheapest and most efficient form of our potential new energy sources? Where is the encouragement for a green energy sprint to help keep costs down? Where is the long-overdue upgrade to the national grid, as referred to by other contributors? Where are the simple efficiency measures for home insulation? How many more times will the Government assert that smart meters can play a crucial role in helping to bring down costs but then fail to make them mandatory?

There are some welcome initiatives, of course. The introduction of the independent system operator and planner for electricity and gas suppliers is very welcome and should help to facilitate delivering net zero. However, the key to becoming a successful ISOP will be establishing true independence from government. The unprotected heat networks, with their half a million customers, will benefit from being regulated by Ofgem, especially as that number is due to grow significantly as we move towards net zero.

As I asked at the beginning, what is missing? The Labour Party will concentrate its efforts on the next stages of the Bill. What measures should the Government bring forward to relieve customers from the immediate cost of living crisis? Why is there no mention of onshore wind farms in the Bill? How reliable is net zero, given the uncertainty about the leadership of the Conservatives and the country? The next leader must have a plan, as Alok Sharma said, or they will be off too. Unless the Government propose amendments of their own, the Labour Party will support and propose amendments on energy efficiency, onshore wind and solar, and seek to establish that net zero 2050 means net zero 2050—if not earlier.

I look forward to the Minister’s response.

Trades Union Congress: Levelling Up

Lord Lennie Excerpts

Wednesday 29th June 2022 Lords Chamber

[Lord Callanan (Con)]

Believe it or not, the pay levels in Sainsbury’s are nothing to do with the Government—it is a private sector company. If people like the service provided by Sainsbury’s, they will go to that supermarket; if they do not, they will go to others.

[Lord Lennie (Lab)]

My Lords, in 2019, across the UK as a whole, one in five jobs were paid less than the real living wage. This figure excludes the self-employed, half of whom earn significantly less than the living wage. For levelling up to have meaning, the TUC has set out recommendations in a report snappily called Levelling Up at Work. Does the Minister agree that it is time that the Government stop fighting the trade unions and work with them to secure jobs across the UK, have decent pay levels and help families overcome the cost of living crisis in this fifth-largest economy in the world?

[Lord Callanan (Con)]

Of course we want to work with all employee representatives who are prepared to be constructive and who want to see a positive way forward for the country that does not hold the travelling public to ransom. No doubt the noble Lord will also be delighted to know that we raised the minimum wage again in April and put another £1,000 in the pocket of the lowest-paid workers.

Warm Home Discount (England and Wales) Regulations 2022

Lord Lennie Excerpts

Monday 20th June 2022 Grand Committee

[Lord Teverson (LD)]

My Lords, it is a great pleasure to follow both the noble Baroness and the noble Lord, who asked excellent questions, particular the question about park homes. There are some 85,000 residents in park homes in this country, and they do not always have the sort of landlords we would like them to have. They are a big issue generally.

Although I welcome this secondary legislation in principle, it is worth noting that this is a reflection of a policy failure over decades, in that we have such a requirement to help people with energy bills because our housing stock is nowhere near the standard it should be. All this, including the £15 billion being spent by the Treasury on the cost of living, specifically around energy issues, is about standing still rather than investing in the future. I know the Minister will say that the Government are investing, but it is a trickle in comparison to what we need. Past Governments have been equally bad at resolving that. This is a symptom of a policy failure over decades in this country.

I shall ask a couple of technical questions on this and will then come on to one or two other things. The figure that rather shocked me—it may be because I misunderstand it—is in paragraph 7.2 on page 3 of the Explanatory Memorandum:

“The Impact Assessment models an improvement to the fuel poverty targeting rate of the scheme from 39% to 47%.”


Does that mean we have moved getting it wrong to 61% from to 53%? I would like to understand that. I remember going through these statutory instruments for Governments, and I understand the problem of trying to target these things correctly and that somehow the statistics or working with data from other departments does not work. But it is worth understanding whether that figure is what I understand it to be and how we improve that for the future because, my goodness, if that is it, we certainly need to improve it.

The next page refers to an algorithm that there were the largest concerns about. We all know the problem with algorithms. They can be great things but, as the Department for Education found out on A-level results, they can be disastrous. I am interested to understand what that issue was and whether it was resolved or was altered in the final prospectus.

Like the noble Lord, Lord Best, what I do not understand—the Minister will forgive me if I have missed it—is how private renters get their money back from prepaid meters. It seems straightforward when the core group are just paid the electricity on their bills. What happens in terms of prepayment meters?

I want to ask about one more thing before a more general point. This is for England and Wales; it talks about Scotland coming on later on but Northern Ireland is not mentioned. Northern Ireland has a much higher rate of fuel poverty than England and Wales—18% historically, though I am sure it will be a lot larger by the end of this year. We do not have a functioning Executive or Assembly in Belfast. Can the Minister say whether the Government will have to legislate directly regarding schemes over there or are schemes that have already been agreed carrying on? Clearly, fuel poverty is a big issue in Northern Ireland.

Lastly, I have a more general question for the Minister. We had an announcement today—it came through on the news—that, rightly, the Government wanted to protect the additional money paid by consumers to retail energy companies that tended to get washed out when they went bankrupt. The answer seemed to be—I know that news reporting is not necessarily accurate—to ensure that the balance sheets of these companies were better in order to solve it. If a company goes into administration, it goes into administration; the balance sheet is washed out automatically in that case. Why cannot we put that money into an escrow account or find some way in which that can be isolated from the company and remains the consumers’ money in trust? I do not understand why that is not a way forward. If the Minister could give me some clue on that, I would be very grateful.

[Lord Lennie (Lab)]

My Lords, I thank the Minister for bringing these proposals, which are an improvement on the previous scheme. I also thank noble Lords for their contributions, in particular the noble Baroness, Lady McIntosh, who represented the NEA’s concerns about the core group 2 and how some of them will miss out, on the way that the scheme is set up, on the funding sufficiency—or insufficiency—and on the prepayment customer concerns, which the noble Lord, Lord Teverson, also raised. The noble Lord, Lord Best, is an expert on the private rented sector. We share his concerns about that; I will come on to that in what I have to say. The overall theme of the noble Lord, Lord Teverson, is that it represents a failure in public policy that we have to have this scheme in any place, but here we are: we have to have it and this is, as I have said, an improvement.

The Government have said that they intend to bring forward a new set of reconciliation regulations “later this year”, which is better than “when Parliament has time” or “in due course”, but can the Minister be a little more precise about when “later this year” means?

On the criteria and the algorithm used to estimate energy costs, how satisfied is the Minister that the algorithms used will not lead to an education-type embarrassment for the Government and, therefore, a failure in terms of there being lots of customers who potentially would benefit from this scheme but may then miss out? Have the Government included all eligible households, including persons with a disability, in their revised six criteria for the new scheme?

The scheme has an impact on energy suppliers, the authority and the Government. The energy suppliers are likely to recover their costs from their customers, which is estimated to be £19—a £5 increase on the former scheme. The authority and the Government are likely to incur costs of approximately £22 million for their work in issuing notices and identifying customers eligible for core group rebates. The Secretary of State will conduct a review or partial review of the scheme, and the authority will review participation of suppliers in the scheme and publish an annual report. This is welcome.

However, Labour would introduce legislation to uplift the warm home discount for 9 million working families and pensioners during the present inflationary crisis. As the noble Lord, Lord Teverson, and the noble Baroness, Lady McIntosh, pointed out, this is an extraordinary time for energy costs. I am not saying that it could have been predicted but Ukraine is upon us and, therefore, more may well need to be done in the lifecycle of this scheme.

Core group 2, which has replaced the broader group, will not now have to apply for inclusion in the scheme, which is welcome. However, there will be households beyond that group who remain in fuel poverty, such as those in rented accommodation. They may be on low incomes and with disputed levels of energy use, particularly when they have no access to what proportion of the payment they make to their landlords is for energy supply. They may not be receiving benefits, which would usually give them automatic inclusion. It may be impossible for them to contest their exclusion. The Minister’s observations on this would be very welcome.

If an energy company goes into administration or disappears entirely, will the supplier of last resort take on the full obligation of the failed supplier or are there now no small-enough energy suppliers left—that is, those with 50,000 customers—that can go bust? Have they all gone bust already? The recovery of the scheme from customers will mean that, in some cases, energy companies will be recovering money from those who have received the warm home discount, thus giving with the one hand and taking away with the other. Would Minister like to comment on that?

The overall scheme is likely to add to the rise in the socialisation of the expenses of suppliers of last resort, resulting in a probable £100 contribution to the increased price cap. Have the Government considered whether the scheme should be covered by Exchequer funding or by a wider group of people contributing, not just individual customer payers?

In welcoming the progress the Government have made with these changes to the scheme, there are a number of observations on which I would welcome the Minister’s response.

[Lord Callanan (Con)]

I thank all noble Lords who have contributed to this debate. The context is that, this year, as we all know, we have witnessed an extraordinary increase in the cost of energy. The Government recognise that millions of households across the UK may need further support with the cost of living, in particular energy bills. That is why the Government have so far announced additional support this year worth more than £37 billion, including targeted support for many of those in the groupings we are talking about today—those on the lowest incomes.

All domestic electricity customers in Great Britain will receive £400 off their bills from October through the energy bills support scheme. Meanwhile, more than 8 million households across the UK in receipt of means-tested benefits will also receive £650 as a cost of living payment. Further payments will be made to pensioners and disabled people. The Government remain committed to helping low-income and vulnerable households heat their homes over the coming winter. Although energy efficiency measures provide long-term assistance in reducing energy bills, as the noble Lord, Lord Teverson, reminded us, there is a clear need for direct financial support now. In this context, the warm home discount remains a key part of our overall approach to tackling fuel poverty.

This is the largest expansion of the scheme since it began. In 2021-22, the energy envelope was worth £354 million across Great Britain; in 2022-23, it is rising to £523 million. This scheme will ensure that 2.8 million households in England and Wales receive a rebate off their energy bills each winter right through to 2026. That means that around a third more households than previously will receive a rebate each year. In addition, most will receive their rebates automatically. This means that households will have much more certainty about receiving the payments when they need them most. A large part of my postbag has been people writing to their MPs and then on to me if they have not been selected as part of the core group 2 element; people do not understand how the scheme works.

The Government have recognised the need for certainty about the support to households in Scotland. We recently consulted on an extension and expansion of a separate warm home discount scheme in Scotland. That was as a result of the Scottish Government not being able to make their minds up about whether they wanted to be part of this scheme, not because of any delays on our part. The Government will publish the response shortly and lay the regulations for the scheme in Scotland as soon as possible.