Prepayment Meters

Lord Lennie Excerpts

Tuesday 14th May 2024 Lords Chamber

Asked by

[Lord Lennie]

To ask His Majesty’s Government what steps they have taken to compensate individuals or households who have had pre-payment meters wrongly installed.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

My Lords, suppliers are responsible for paying compensation. It is paramount that customers affected by the involuntary installation of some prepayment meters receive compensation as soon as possible. Suppliers have so far carried out 150,000 assessments to ensure that those impacted get the compensation they deserve. Of those, around 2,500 customers have been identified as requiring compensation, and 1,502 payments worth £342,000 have been made so far. We engage with Ofgem regularly to ensure that suppliers compensate remaining customers promptly.

[Lord Lennie (Lab)]

I thank the Minister for that Answer. However, as he said, the assessment was carried out by the selfsame people who supplied the enforced prepayment meters in the first place. Does he not see that there is a potential conflict of interest here? Will he say whether the Government have arranged for any independent checks to show that these assessments are accurate and are not simply letting companies mark their own homework?

[Lord Callanan (Con)]

I understand the point the noble Lord is making, but that is the role of the independent regulator Ofgem. My Secretary of State and Minister Solloway have had regular meetings with suppliers directly and with Ofgem to ensure that they are doing the job correctly and that the assessments are being made correctly, but the noble Lord is right, and we are monitoring the situation closely.

Contracts for Difference (Sustainable Industry Rewards) Regulations 2024

Lord Lennie Excerpts

Monday 13th May 2024 Grand Committee

Finally, what is the earliest proposed date that the policy could be extended by new legislation, if that was a desired outcome for this Government or the next one? Will the need for new legislation be hampered by any lack of statutory review included in these regulations? For example, if there were a change of Government, would the fact that there is no statutory review impact on any incoming Government’s ability to bring forward new legislation? While I welcome this SI and its intentions, I am not certain that the powers that it delivers will alone be enough to deliver the desired policy outcomes that the Government seek to achieve.

[Lord Lennie (Lab)]

My Lords, before I begin my comments on sustainable industry rewards, I want to place on record my congratulations to Gateshead Football Club, which on Saturday beat Solihull Moors at Wembley, after extra time and penalties, in the FA Trophy. I am sure that the Minister would want to join me in sending congratulations to Rob Elliot and the whole of his team up on Tyneside, where we both live.

This instrument amends the current contracts for difference regulations and is specifically about providing extra funding in order to support supply chains in the offshore and floating offshore wind sectors. As things stand, contracts for difference focus only on the price of deployment, as the Minister said; developers are therefore incentivised to use the cheapest supply chain, which may not always be the cleanest. This instrument introduces SIRs—sustainable industry rewards—to try to rebalance the CfD scheme in addressing the supply chain challenges.

All offshore floating wind applicants for a CfD will have to obtain an SIR statement from the Secretary of State as a precondition of having an application considered. Once the SIR statement is obtained, applicants will get additional support through what the Minister called a “top-up” in the CfD for investing in the economic, social and environmental sustainability of their supply chains.

I turn to the two criteria that the Minister outlined: investment in shorter supply chains in the most disadvantaged places in the UK; and investment in more sustainable means of production, where manufacturers committed to a science-based targets initiative for the reduction of carbon emissions. The impact on consumers, as suggested by the Minister, will be small—approximately £2 per annum per bill—and the proposed time is limited to three years or three rounds of allocation.

Labour is very supportive of these changes, as I am sure the Minister is aware. We believe that they will make a material difference to the quality of the scheme supported by the Government and to the impact on the whole industry with regard to UK-sourced materials, the maintenance of jobs, the sustainability of the supply chain and end products. There are, however, a few questions that I would like to put to the Minister.

The Minister again suggested, as was suggested in the previous debate, that the budget will be up to £300 million. When will this be finalised? When will we know what the budget for the SIRs will be? Secondly, why is the scheme limited to just three rounds or three years? Would it not be a good idea to make it a permanent or indefinite scheme, with an option to consider axing it at the end of the three rounds, if appropriate, rather than requiring new legislation to come before the House for it to continue? Is it possible for a company to bid in the final round allocation for the CfD if it meets the eligibility criteria for an SIR but does not win funding because of the scheme’s budgetary restrictions? If the budget has been spent, what happens to that application?

Finally, I repeat Dr Alan Whitehead’s question in the other place when these regulations were discussed; I do not know whether he has had an answer yet but, if the Minister could provide an answer today, that would be good. Is it the case that the most disadvantaged in the allocation round may well be those who bid for an SIR but lost, and have then adjusted their bid accordingly? Could it be that the smartest strategy for companies is to try to lose an SIR while having indicated that, in principle, they can meet its terms? They can then bid more competitively than if they had an SIR in the first place. I look forward to the Minister’s response.

Offshore Petroleum Licensing Bill

Lord Lennie Excerpts

Committee stage
Tuesday 23rd April 2024 Grand Committee

Moved by

[Lord Lennie]

3: Clause 1, page 1, line 6, at end insert—
“(aa) the climate change test (see section 4ZD);”Member’s explanatory statement
This amendment, together with the other in the name of Lord Lennie, sets out the climate change test to be applied by the Oil and Gas Authority before inviting applications for seaward new production licences.

[Lord Lennie (Lab)]

My Lords, I will speak to Amendments 3 and 18 in my name. These amendments set out the climate change test to be applied to the Oil and Gas Authority before inviting applications for new seaward production licences. Before detailing what the amendment calls for, I point out, as I said at Second Reading, that this is an unnecessary and damaging Bill. It undermines the independent authority of the NSTA and reinforces the perception around the world that the UK is rowing back from climate change, as described by Sir Alok Sharma MP, the highly respected former president of COP in the other place. So, nothing we can do in Committee or on Report would improve the Bill better than ditching it altogether; no improvements can make fresh fruit out of rotting vegetables.

The tests that the Bill sets are fundamentally flawed, and any tests that we may introduce would still be weaker than Labour’s overall position of no new exploration licences. Labour recognises—this is to reassure those who are concerned—that production will continue in the North Sea for decades to come. Oil and gas will continue to supply our domestic energy market well beyond the lifetime of most of us in the Room.

The Bill could or should have set a strategic direction or plan for how we deal with North Sea workers transitioning to new jobs in renewables, as set out by the noble Baroness, Lady Hayman. However, how we manage our North Sea assets for the long term and maximise the low carbon potential of the North Sea are also missing from the Bill. It does not do any of this; it just sets these tests that cannot be failed and demands that the NSTA carries out annual licensing of new oil and gas fields.

These tests are, first, that the carbon intensity of domestic natural gas is lower than the carbon intensity of liquefied natural gas imported into the United Kingdom. It is, and it always will be. The second test is that the UK is projected to remain a net importer of oil and gas. It is, and it always will be. The amendment that replaced these tests states the following:

“The climate change test is met in relation to a relevant year if the Intergovernmental Panel on Climate Change on the mitigation of climate change publish a report following the passing of this Act which makes a finding that the granting of additional seaward area production licences is consistent with limiting warming to 1.5 degrees centigrade”.


It is the Government’s policy to achieve 1.5 degrees centigrade. It was agreed at the Paris Agreement that 1.5 degrees centigrade is what we should achieve. This test is very straightforward and consistent with government advice of achieving 1.5 degrees of global warming. The IPCC has previously said that the Bill as it stands is not compatible with our climate change goals. However, unlike the Government’s tests, this test is not set up so that we cannot fail. If the evidence base was updated to suggest that this action was compatible with our climate goals because the climate science had changed, or because the technology around oil and gas extraction developed, the Labour test could be passed.

If we are to take our responsibilities seriously as a prime mover in the fight against climate change, we should adopt the strategy that carefully manages our North Sea oil and gas production, while maximising the low carbon potential of the North Sea. The government tests just simply do not achieve this. We need proper policy developed in the round for this to happen. The Bill as drafted does not allow for this. It is concerned only with the unnecessary mandatory licensing rounds, and as such is a nakedly political proposal, as has been suggested by others.

Does the Bill even attempt to approach the fact that demand for gas will undoubtedly decline as we decarbonise our power sector and electrify more? Can the Minister say what the Government’s strategic thinking is in this area? Instead of doing the hard work and producing holistic plans, they have played politics with the UK’s reputation and workers’ futures. We can and should do better than this.

As for the other amendments in the group, I highlight those in the name of the noble Earl, Lord Russell. They remind us that the Secretary of State for Energy Security and Net Zero confirmed that the Bill would not reduce energy bills, and that that is not its purpose. With the cost of living crisis hurting everyone, reducing energy bills should be a priority for the Government, and the Bill should reflect that—but it does not. I beg to move.

--- Later in debate ---

With the explanations I have been able to provide, I hope that noble Lords will agree to withdraw or not press their amendments.

[Lord Lennie (Lab)]

My Lords, at Second Reading, I quoted Alan Whitehead MP saying that this Bill was cooked up over a long lunch and should have been buried before the effects of that long lunch had worn off. Unfortunately, it has not been, so we have to try to deal with it. The Minister appears to be not complacent but content that we are making the progress we need to make. The Government believe that we are on track to hit 1.5 degrees Celsius by 2050 but the test would introduce an independence to the measurement of that, through the IPCC—the global body and the right body to do the test. It is not a body in this country but a global body that can measure, compare, contrast and make judgments about whether our plans do indeed meet the intended targets.

The cost of living issue is a probing one but it reminds us what the Secretary of State said in response to a question about it—the Minister has repeated it—which is that it is not the purpose of this Bill to reduce energy costs. Surely the question of how we make sure that we reduce energy costs must be fundamental to all our considerations of energy policy in this country. There has been a reduction since the massive inflationary pressures of the post-Covid years, but they are not low and we can do more to reduce those costs to customers.

On that note, I beg leave to withdraw the amendment at this stage.

Amendment 3 withdrawn.

--- Later in debate ---

[The Duke of Montrose (Con)]

I apologise for the fact that I did not participate at Second Reading. I declare an interest as a Scottish income tax payer to the noble Earl, Lord Russell, who is concerned with what comes back to Scotland. I am horrified at his idea that Scotland should be left out of the Bill.

As far as my memory serves me, in July 1998, in discussing Schedule 5, all energy was reserved to Westminster and, at a later date, renewable energy was devolved to Scotland. So if Scotland does not appear in this Bill and there is no continuing power to develop things in Scotland, this amendment would mean the end of any exploration for petroleum products in the Scottish area, in the surrounding oceans or on land.

[Lord Lennie (Lab)]

My Lords, I thank everyone who has spoken in the debate so far. I thank the noble Earl, Lord Russell, for his proposal about omitting Scotland from the Bill, and the noble Duke, the Duke of Montrose, for his horrified response to the proposal to omit Scotland from the Bill. I am not sure about the debate on Scotland, to be honest, but on balance I think I would keep Scotland in the Bill. I say to the noble Baroness, Lady Jones, that I can see why these amendments would delay the Bill coming into effect, which would not be a bad thing. It would be better if the Bill were not here at all, but, hey, we cannot have everything we want.

The Government have admitted that the Bill will not take a penny off energy bills and will do nothing for energy security, because oil and gas are sold on the international market. The Bill will send precisely the wrong signals to investors about the UK’s commitment to the green transition: Amanda Blanc, chief executive officer of Aviva said that new oil and gas drilling

“puts at … risk the jobs, growth and the additional investment the UK requires to become more climate ready”.

The Bill has been slammed from many quarters, including some surprising ones, such as Theresa May, former Prime Minister. The noble Lord, Lord Browne, former chief executive officer of BP, said it

“is not going to make any difference”

to Britain’s energy security.

Annual licencing rounds will not boost the UK’s economy, as North Sea oil and gas is already in decline, as the Minister confirmed, and over the next decade, in Scotland and England, there will be 25 new jobs in clean energy for every job that is lost in oil and gas. That is what we have to secure: the transition of workers from oil and gas to the new green, clean energy. More extraction in the North Sea will not improve any security or lower energy bills. Remaining reserves are mostly oil, not gas, and 78% of that oil is exported, as it is not in the right form for use in the United Kingdom. The UK is already feeling the devastating impact of climate change, and granting licences simply amplifies the effects. Campaign groups have indicated that the current licences will send “a wrecking ball” through the UK’s climate commitments.

[Lord Callanan (Con)]

First, I thank noble Lords for their brevity on this group.

Amendment 20 seeks to amend the Bill to exclude Scotland. Of course, the vast majority of offshore oil and gas activity takes place off the coast of Scotland to the benefit of all citizens across the United Kingdom. Excluding Scotland from the scope of the Bill, which I understand is the intention of the amendment, would significantly undermine the benefits that the Bill is intended to create. It would risk causing unnecessary confusion for industry and create considerable complexity for the independent regulator. This is particularly true as we transition towards a low-carbon economy and workforce.

As I have already mentioned in previous groups, a report by Robert Gordon University found that over 90% of the UK’s oil and gas workforce have medium to high skills transferability to the offshore renewables sector. Many of those, of course, are in Scotland, where OEUK estimates that over 90,000 jobs are supported by the oil and gas industry. If we rush the transition, or create additional uncertainty in the investment environment, we risk losing the jobs and skills that we will need as we scale up the clean technologies needed to realise that crucial net zero target.

Surplus Carbon Emissions

Lord Lennie Excerpts

Wednesday 27th March 2024 Lords Chamber

[Lord Callanan (Con)]

There is a degree of truth to what the noble Lord says. I do not characterise it as our having de-industrialised; we have some very successful manufacturing industries in this country, many of them low-carbon industries. Of course, the issue of carbon leakage is important, and it is one reason why we have committed to introducing a carbon border adjustment mechanism; we are currently consulting on the precise make-up of that. However, the noble Lord is right that it is a factor.

[Lord Lennie (Lab)]

What impact will the Offshore Petroleum Licensing Bill have on our ability to meet future carbon budgets?

[Lord Callanan (Con)]

As we debated extensively last night, it will have a negligible impact.

Offshore Petroleum Licensing Bill

Lord Lennie Excerpts

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Lennie (Lab)]

My Lords, it is a pleasure to follow the Minister, who set out the Government’s reasoning for the Bill. It is very straightforward in what it does: it would require the North Sea Transition Authority to run an annual oil and gas licensing round, inviting applications for new production licences in our offshore waters.

What is less clear is what the Bill will actually achieve. While families and businesses across the country are feeling the impact of the Government’s energy policy, which has left us the worst hit in western Europe, the Government have brought forward this Bill. It is a Bill that the Government have already admitted will not take a penny off the outrageously high energy bills that people are struggling to pay. It was our high dependency on fossil fuels that put British households in the recent situation that they have been in, so the Bill doubles down.

It is a Bill that will not do anything to address our energy security, as oil and gas are sold, as the Minister knows, on the international market—a case made expertly by the noble Lord, Lord Browne of Madingley, who, I suggest, knows his stuff. The more we depend on fossil fuels, the more we will depend on those who control, and set the prices on, that market.

It is a Bill that is not necessary to bring down energy imports; the only way to do that for good is to produce more clean power at home that we can control. It will not send the right signal to investors on the UK’s commitment to green industry. It is not good for jobs as the number of North Sea workers decreases, or for the public purse, which has spent far more on subsidies recently than any possible tax revenue. It is certainly not good for the environment; in the words of the Government’s former net zero tsar:

“There is no such thing as a new net zero oilfield”.


So what exactly is it intended to achieve? All we can see is areas where it takes us in the wrong direction, not least on protecting the environment. We are certainly not alone in this view. The way to enhance energy security, according to the National Infrastructure Commission, is to move away from fossil fuels. In its words:


“Reliance on fossil fuels means exposure to geopolitical shocks that impact the price of these internationally traded commodities”.


This Bill does the opposite.

As for investment, the CEO of Aviva made it very clear that new oil and gas drilling


“puts at clear risk the jobs, growth and the additional investment the UK requires to become more climate ready”.

Then there are the thoughts of the former net zero tsar who quit Parliament over this Bill, the right honourable Chris Skidmore, and the widely respected former COP president, the right honourable Alok Sharma. Chris Skidmore called the Bill

“another historic mistake and a grave error”

that is

“totally against the sentiment and direction of the global stocktake”.

Furthermore, he reported from Dubai that the UK’s international leadership will be undermined until a moratorium on new licences is resumed. Alok Sharma said that it would

“reinforce the … perception of the UK’s rowing back from climate action … and that does make our international partners question the seriousness with which we take our international commitments”.—[Official Report, Commons, 22/1/24; col. 52.]

With how little of substance the Bill will achieve, the only obvious answer is that the Government see it as a symbol. As we have made clear, the symbol that is being sent is very much the wrong one.

We will try to improve the Bill during the remaining stages, but let me be clear. First, what is needed is not an improvement to the Bill but a whole different approach. We need the UK to be made a clean energy superpower with cheap and secure energy so that families and businesses are protected from spiralling bills, and jobs and investment are boosted across the country. That is the Labour Party’s mission: to cut bills, create jobs, deliver energy security and provide climate leadership. This Bill does pretty much the opposite. But given that the Government are determined to press on with a Bill that will achieve nothing, it would be irresponsible not to seek to improve it. So we will look to see what we can do.

The Bill contains two tests that should be passed before the North Sea Transition Authority can proceed to issue a licence—but these tests, as drafted, cannot be failed. Liquefied natural gas will always be more greenhouse gas intensive in production than UK natural gas. There is no situation in which the North Sea field will meet our total demand for gas and oil. Tests that cannot be failed are simply pointless. We seek to replace these tests with ones that produce a proper judgment about whether a licence should be issued. These tests will be based first and foremost on whether issuing a licence would be in line with our climate change goals. I also look forward to the House considering other areas in Committee—methane, leak detection, protection of green areas—and seeing where we can find cross-party agreement to maybe even give this purposeless Bill some purpose.

The Bill does, however, have one merit. It has given rise to one of the most remarkable speeches made in the other place, by Dr Alan Whitehead MP. I will finish by quoting part of his speech:

“The whole Bill appears to have come about as a result of a wheeze, cooked up by a couple of strategy advisers over a heavy lunch, to put the Opposition on the wrong foot … Quite honestly, that wheeze should have been put down as soon as the effects of the heavy lunch wore off, but instead it has … finally made it to the Floor of the House in the shape of this risible Bill”.—[Official Report, Commons, 22/1/24; col. 105.]


Exactly so.

--- Later in debate ---

[Lord Lilley (Con)]

I am grateful to the noble Baroness for that clarification. Somebody used the 200,000 figure—it must have been the noble Lord, Lord Lennie. Anyway, it does not matter.

[Lord Lennie (Lab)]

The Minister.

[Lord Lilley (Con)]

The Minister did. The noble Baroness has acknowledged that the figure is about 30,000, rather than 27,600; I do not really see the difference, frankly. The point is not which figure is bigger. Why should we sacrifice 30,000 jobs?

Strategy and Policy Statement for Energy Policy in Great Britain

Lord Lennie Excerpts

Monday 25th March 2024 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I thank noble Lords who have contributed thus far to the debate for making my job somewhat easier than it would otherwise have been and for raising important questions. The noble Baroness, Lady McIntosh, raised the affordability of standing charges from the NEA. The noble Lord, Lord Naseby, raised a lot of concerns about lack of progress in a number of areas, which, no doubt, the Minister will address. The noble Earl, Lord Russell, had a range of concerns, particularly about a lack of potential progress on the auctioning of offshore wind contracts for difference, which is about to take place—I think next week.

For my own part, there are three points I want to raise this evening. First, this is the first statement since the Government’s Energy Act 2013 facilitated such statements. Secondly, while we agree with much of the statement, there are some clear differences between the Conservatives and Labour: in particular, on setting 2030 as the date by when Great Britain will be a clean power generator. Thirdly, there is a lack of detail and therefore a need for revision at the earliest opportunity.

I will take these points in order. The Energy Act 2013 assumed that a strategy and policy statement would be essential to align government policy with the actions of government agencies and bodies such as Ofgem and ensure they were marching in lockstep. There has not been a statement since 2013. As the noble Earl, Lord Russell, said, given the five-year gaps between statements, we should now be reviewing our second statement.

However, this policy statement is important in seeking to align government and Ofgem, with Ofgem having recently been designated with a net-zero mandate under the Government’s energy policy of 2023. The Government cannot direct Ofgem, so Ofgem cannot operate unless there is such a policy statement. While this policy statement has been delayed—let us say, since 2013—it is certainly now welcome.

These policy statements are supposed to last five years. We should have had a strategy and policy statement immediately after the 2013 Act, and we should now be revising the second one. It is also clear that the strategy and policy statement will not last more than a year or so from now, because there will be a general election. The outcome of that election is not yet known but, should Labour win, it will certainly be reviewed. Can the Government say why no policy statement has been submitted before now?

While much of the statement is welcome, there are some clear differences between the Government and Labour. The original 2030 date by when we were to have clean power is no longer accepted by the Government. They have recently put back from 2030 until 2035 the date for ending the sales of internal combustion engines, in effect, meaning there will be at least a five-year delay. Their former net zero tsar, Chris Skidmore, and their widely respected former chair of COP, Alok Sharma, have both been highly critical of the Government’s policy. This will surely do nothing to reassure either of them.

There are also areas as yet undefined and unclear, such as the relationship between ISOP—now to be called the national energy system operator—and Ofgem. NESO is a commitment in the Energy Act 2023 but, as we have heard, is yet to be established. When it is, there will be much work to be done to define its relationship with Ofgem as well as questions to be addressed about the regional energy system planners. Once NESO is set up, will there be a statement about these matters, including its relationship to Ofgem and, therefore, to government?

There are other areas that require updating. As the noble Earl, Lord Russell, said, these include a plan for developing long-duration energy storage, as well as the 2030 fuel poverty target, which National Energy Action says will be missed by 90%, and the rollout of smart meters, which is well behind the time set originally by the Government. These and other areas in the statement are either unexplained or undefined. Will any update on these matters be forthcoming?

Finally, a strategic policy statement must take account of the real state of the policy landscape or risk irrelevance; but a statement is better than none at all, which is why we welcome this statement despite its shortcomings

[Lord Callanan (Con)]

My Lords, I thank all noble Lords who have taken part in this debate. First, I am confident that the strategic priorities and policy outcomes in the SPS clearly establish what the Government are trying to achieve in the sector. I think it got fairly widespread support and it established why this is important, demonstrating how these smaller policy outcomes contribute to the broader strategic priorities so that stakeholders can be reassured of how their role fits into the bigger picture.

I hope that the SPS gives industry a sufficiently high-level understanding of the roles, responsibilities and remit of government and the regulators in helping to deliver these objectives. Particularly in the case of NESO, we have provided enough information on the body’s remit to give confidence on the role that it will play when it is established, while also recognising that its responsibilities will evolve over time. As well as reaffirming our ambitions, this SPS will give encouragement to Ofgem to utilise the full range of its existing powers to ensure that those ambitions are realised and that stability and confidence are restored across the sector.

I move on to the points that were raised in the debate, starting with my noble friend Lady McIntosh. The SPS makes clear the importance of tackling fuel poverty, as was also raised by the noble Lord, Lord Lennie. Ofgem has conducted a call for evidence on the standing charges issue. I know it is a very topical issue; there is a lot of concern. Ofgem received over 40,000 responses to that consultation. It is reviewing those responses. The Government are liaising closely with Ofgem to understand the options going forward. It is an independent regulator, and it would not be right to interfere in the decisions that it will make, but we do understand the concern that has been raised.

The NESO will be funded and regulated by Ofgem through licences and the price control process, as is the case with the electricity and gas system operators today. That is a well-known model, understood widely across the sector. The approach will provide accountability, scrutiny and, of course, value for money, while ensuring that the NESO is able to deliver fully on its objectives.

As part of agreeing future price controls, Ofgem will ensure that NESO is fully resourced to fulfil its objectives and the obligations set out in its licence, including the funding of its statutory duties such as those towards innovation and keeping developments in the energy sector under review. As with other regulated bodies in the sector, the NESO will have the operational freedom it needs to manage and organise itself to effectively deliver its roles and objectives.

I move on to the points raised by my noble friend Lord Naseby. He quoted extensively from the National Audit Office report on home heating. That is of course different from what we are debating today, but he raised some very good points, particularly on the rollout of heat pumps et cetera, on which I agree. My noble friend will be aware that we took a decision not to proceed with the hydrogen village trial last year. That was due chiefly to the lack of available hydrogen, but it also took into account the real concerns that were raised by many members of the public in that area. It is undoubtedly the case that electrification will provide the vast majority of the decarbonisation options in home heating; hydrogen will play a very limited role, if any, in the decarbonisation of heating.

In response to the questions raised by the noble Earl, Lord Russell, and the noble Lord, Lord Lennie, our aim continues to be for the NESO to be operational in 2024, depending on a number of factors including agreeing timelines with various key parties.

On the review of the SPS, I confirm that the Secretary of State can review the strategy and policy statement at any time—for example, following a general election or a significant change in energy policy.

On the questions raised by the noble Earl, Lord Russell, about the rules and responsibilities of NESO, I confirm that we have set out the roles and responsibilities of government, Ofgem and NESO at a high level in the SPS. The Government set the policy direction, while Ofgem is the independent regulator and makes decisions on business and investment plans. NESO will be the whole system planner, the operator of the electricity system, and the expert adviser to the Government and Ofgem as key decision-makers.

We are currently developing a framework agreement, which will set out the relationship between the Government as the shareholder and NESO. We plan to publish this shortly after designation. The specific roles and obligations of NESO will be set out in its licences, on which Ofgem undertook an initial consultation last year. We are due to undertake a statutory consultation this spring. However, as mentioned previously, we expect that NESO’s role and remit will continue to evolve over time as energy policy develops.

On NESO not being able to raise concerns over the achievability of SPS outcomes until it is established, I reassure the noble Lord that Ofgem will also have a responsibility to raise concerns over achievability. We are already in frequent dialogue with the current electricity system operator, on which NESO will be based, where the Government’s ambitions for energy are regularly discussed.

Finally, I move on to the point made by the noble Lord, Lord Lennie, on why now is the right time for the SPS. The Energy Act 2023 introduced new measures and established the independent system operator and planner in the first place as NESO. We thought that now was a good time—to reply to the point about major policy changes—to develop strategic guidance to explain exactly how we believe that Ofgem, government and NESO would work together to meet the Government’s energy priorities going forward.

I hope I have been able to deal with all the points raised by noble Lords.

Energy Bills Discount Scheme (Amendment) Regulations 2024

Lord Lennie Excerpts

Tuesday 12th March 2024 Grand Committee

[Earl Russell (LD)]

My Lords, this statutory instrument sets out to enable the Secretary of State to put down a date after which heat networks may no longer be able to make an application for support under the energy bills discount scheme. The EBDS was established in April 2022 to provide non-domestic energy consumers with a discount on their higher gas and electricity bills. It also gives discounts to domestic consumers on communal heat networks, who, unlike households using a normal mains electricity or gas supply, were not supported under the terms of the energy price guarantee.

Under the terms of the EBDS, qualifying heat suppliers—QHSs—are required to apply for support, which they must then pass on to the domestic customer in the form of energy bill discounts. The Minister in the other place noted:

“Without that support, domestic customers on heat networks would have been exposed to the full impact of high wholesale market prices. The support that we have provided through the EBDS regulations is estimated to be worth £180 million in total, and £1,200 for the average … customer”.—[Official Report, Commons, Fifth Delegated Legislation Committee, 5/3/24; col. 3.]


This is, if you like, the architecture that was set up at pace and at scale to deal with, as the Minister here has said, the consequences of the invasion of Ukraine, its impact on rising energy costs here and the impact of that on the cost of living.

I want to be clear that any comments I make on this statutory instrument are set against a background of welcoming all the measures that the Government put in place, at scale and at pace, to deal with those consequences in response to what was a crisis. That being said, I have some concerns about this instrument and its impacts; I am also concerned about the way in which this scheme was set up, particularly for people on communal heat networks. I also note that this instrument has been noted as being of interest by the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments.

The Government’s position is an administrative one in wanting to bring this scheme to an end. I fully understand that. The legislation, as originally drafted, means in effect that there is no end date, so, although the scheme will end, people will be able to continue to make applications for ever. That clearly has to end, so I have no disagreement there.

The intended end date is 31 March 2024. As the Minister said, there will be a two-week extension for those people who could not reasonably be expected to make an application because they hit the deadline. From a purely administrative point of view, this all seems fine and reasonable, but, from a customer’s point of view, there are impacts here. The customers we are talking about are those who are vulnerable and living in social housing.

The way in which the system was set up was not brilliant. I do not think that the operators of communal heat networks should have been required to apply in order to get the discounts in the first place. There have also been problems with pass-through to customers living in communal heat networks.

I want to ask a couple of questions before I come to an end. The end date is the end of this month, so it is literally the blink of an eye away. Why the urgency here? The Explanatory Notes say that the Government are still getting 20 applications a month. Is there the possibility of extending this?

I am concerned about what the Government are doing to inform the end-users and beneficiaries of these schemes. My thinking is that one of the reasons why this scheme was set up the way it was is that the Government do not have proper databases on the number of communal heat networks that exist, let alone the people in them. I understand why, in response to a crisis and not having those databases, the Government went down the route they did. However, I feel that this situation is likely to repeated in future. I request that the Minister and his department think again about trying to set up databases, so that the next time we are in this position, the discount on the cost of energy for people living in communal heat networks can come directly to them. That would be one point.

The numbers may not be that great, but there are still 60,000 individuals from vulnerable groups, as both committees have noticed. The cost per individual is likely to be £1,200. These are vulnerable people, and this is a big loss to them.

I note that the Government say that people can still seek redress through the ombudsman and the court system. However, that is quite slow and blunt, and applies only where owners of communal heat networks have made an application and received the funding but not passed it on to the end-user. I could find nothing in the information provided, but does the Minister know how many of those particular cases there are and what action the Government will be taking to support residents in those cases? Clearly, that is a criminal case—I am sorry if I am wrong and happy to be corrected—as the owner of a network has a discount but has failed to pass it on.

That is pretty much it from me. My real concern is that these are vulnerable people, and I encourage the Minister to do everything he can to make sure that they are supported. My real point is about learning, so that, the next time we are in this position, we can make sure that people in these situations get a better deal.

[Lord Lennie (Lab)]

My Lords, as we have heard, this instrument enables the Secretary of State to set a date after which heat networks can no longer apply for support under the energy bills discount scheme. Under the scheme, qualifying heat suppliers are required—that is the word used—to apply for support, which they then pass on to their domestic customers in the form of energy bill discounts. The Department for Energy Security and Net Zero has said that not all QHSs have applied for EBDS support. Although the scheme itself will end on 31 March, there is currently no effective date for applications to be received. The Minister has set this out—so far, so tidy.

DESNZ has estimated that 3,000 qualifying heat suppliers may not have applied for the EBDS, but we do not actually know, because there was no register of the qualifying heat suppliers. We do not know how many there are or where they are, so we cannot follow them all up. That is one of the problems with the scheme that was set up. However, we estimate that up to 60,000 domestic customers may lose out on support as a result of qualifying heat suppliers not applying for a scheme discount, as required.

As we have heard from the noble Earl, Lord Russell, the noble Lord, Lord Vaux, and the Minister the value of lost discounts is about £1,200 a customer. That loss will disproportionately affect disadvantaged groups, such as the elderly and ethnic minorities—people who have been described as “skint little people”—who are significantly more likely to be on heat networks. Could the Minister set out what specific initiatives have been undertaken to encourage take-up of EBDS bids by heat networks? Have they made inroads into identifying where the qualifying heat suppliers are, so that they can be targeted and encouraged to apply? Which initiatives have been successful, if any, and how recently? Has it been an evolving, slow process?

The proposal in this instrument makes administrative sense, rather than leaving open an estimated total liability of £6 million for not closing the scheme to new applicants. Administrative sense is one side of this equation; the other side is the customers, and it seems less considered from their perspective. The Joint Committee on Statutory Instruments and His Majesty’s Opposition initially expressed concern that an obligation was being placed on intermediaries without any means of enforcing it. It is all very well requiring someone to do something when, if they fail to do it, nothing happens except that the individuals can take them to court or to the ombudsman.

How many times has that happened during the course of the scheme? I suspect it is very few times, if any. Can the Minister tell us whether any such initiatives have been taken? Essentially, this is about a vulnerable customer being required to take their landlord to court to get a subsidy for their gas bill. The chances of that happening are fairly remote, but we will no doubt hear from the Minister on that. This means that companies and organisations that have failed to apply for, or pass on, discounts have simply got away with it. Who knows the truth of that? We do not know who they are.

As I indicated, we support the closing of the scheme and the ending date for applications, but we are unhappy with the way the scheme has been allowed to drift into oblivion with no forfeit for those who should have acted on it.

[Lord Callanan (Con)]

I thank all three noble Lords for their contributions. I am proud to say that, through the scheme, the Government have provided support to hundreds of thousands of households, helping them with financial pressures when they needed it most. The Government remain fully aware of the continued challenges posed by cost of living pressures, including the impact of energy bills. We are providing extensive financial support to households, including a package of support to assist households with the rising cost of living—this will total over £104 billion, or £3,700 per household on average, between 2022 and 2025. All three noble Lords recognised the extensive package of support that was put in place.

I totally understand the points made by the noble Earl, Lord Russell, and the noble Lord, Lord Lennie, on the heat network sector. The noble Earl is right that our database is not as good as it could be in terms of what heat networks are available. It is perfectly possible at the moment for anybody to build a block of flats and, in effect, set up a heat network; they do not necessarily have to tell the Government about it. However, if noble Lords remember, we recognised that in the Energy Act, where we took powers to regulate the heat network sector. That is why we are introducing new consumer regulations for heat networks and, from next year, we will have new consumer protections in place, provided through the Energy Act. That will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be unfair, or if prices are significantly higher than comparable heating systems. They are, in effect, natural monopolies, and therefore it is right that consumer protections exist. Those regulations will also seek to introduce back-billing rules, which exist already to protect gas and electricity customers.

The noble Lord, Lord Vaux, raised an important point about reaching as many customers as possible. It is indeed a priority for my department to ensure that as many customers as possible access the support available to them. So far, 12,000 applications have been approved under the scheme, which means that hundreds of thousands of domestic customers have been supported. We think that that figure of 12,000 represents the vast majority of qualified heat suppliers. We know that a scheme that was very much developed in haste in response to the energy crisis—as noble Lords will remember—was never going to be perfect. On top of that, we will strive to make sure that as many people as possible are reached by the scheme— but we think that it has reached the vast majority of eligible customers. We are targeting communications at heat suppliers with vulnerable customers, including housing associations and local authorities, and we will continue to do so.

The noble Lord, Lord Vaux, raised an important question—not at all related to this statutory instrument—about the distortions of gas and electricity pricing, and the protections provided to customers as part of that. It is fair to say that this is a big issue that we are concerned about. Ultimately, the answer to the noble Lord’s question is that, as the amount of gas on the network declines and the amount of gas used to generate power declines, prices will stabilise and there will be a steady decoupling. There are no immediate solutions to that. Perhaps it would be more sensible for me to write to the noble Lord with more detail on the considerations that have gone into this, because a lot of work has gone on, including a lot of studying of the market to see how we can improve it. I recognise that many people consider that they are getting renewable electricity through their suppliers, but the price that they receive for it reflects the cost of gas in the system, because it is a centralised market. I recognise that people see that as anomalous, and we are looking closely at this.

As I said, we recognise that customers on heat networks are not currently protected by the same set of protections as other customers, so in future they will be protected by Ofgem via the regulations that I mentioned earlier. The noble Earl, Lord Russell, raised concerns about the impact on vulnerable customers on communal networks. Careful consideration has been given to equality when amending these regulations. We are fully aware that heat networks are more likely than other comparable heat sources to serve vulnerable and elderly customers, which is why we have carried out a number of activities to try to ensure that they receive the support to which they are entitled. We continue to engage with stakeholders such as the Heat Trust to learn about any issues with the customer journey, such as on the pass-through, and any other heat networks struggling with their applications so that we can continue to provide them with support.

--- Later in debate ---

[Lord Lennie (Lab)]

In the unlikely event that a customer takes a heat network to a court or ombudsman before the scheme closes, I presume that that application could continue beyond 31 March if it is not resolved by then and that the payment could duly be made.

[Lord Callanan (Con)]

That is indeed the case. The application would continue beyond 31 March. Even after the scheme has ended, the responsibility of the supplier during the application of the scheme continues to be legally valid and therefore it is possible to take retrospective action against a heat supplier that has not fulfilled its legal obligations.

Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024

Lord Lennie Excerpts

Tuesday 13th February 2024 Grand Committee

[Earl Russell (LD)]

No? Okay, that is fine. Finally, how will the Minister monitor the implementation of the changes? Will that be reported anywhere?

[Lord Lennie (Lab)]

My Lords, this instrument enacts the Nuclear Decommissioning Authority pension scheme, based on the review of public sector pension schemes by my noble friend Lord Hutton in 2011. This resulted in the Public Sector Pensions Act, which enabled the majority of public sector pensions to move from final salary to career average revalued earnings schemes. About 8,000 workers are affected as a result of this instrument. We have nothing to complain about on the scheme, but the process has raised a few questions, as the noble Lord, Lord Young, and the noble Earl, Lord Russell, have pointed out. I would like these to be addressed.

During the consultation, many respondents raised concerns that the proposed definitions and the application of the proposed powers were insufficiently clear or too broad. Many sought assurances that the powers would be restricted to implementing the reform agreed with their national trade unions. Furthermore, respondents requested either member or trade union and/or trustee engagement prior to the use of any of the powers. Could the Minister respond to those concerns?

The trustees of the CNPP and MEG-ESPS asked that they be given sufficient time to review the final rule amendments, indicating that about 12 months would have been appropriate. The response to the consultation says that, in the light of this specific request, as much notice as possible would be given to the trustees and members prior to implementation. We now know that the implementation date will be 1 April 2024. Can the Minister tell us when the Government notified the trustees of the changes? Did they deem this sufficient for their purposes of consultation and informing their members?

The noble Lord, Lord Young, raised a concern regarding the reform of the pensions for NDA employees who are covered by the Electricity (Protected Persons) (Scotland) Pension Regulations, which were not included in the public consultation. There are very few of them, as the noble Lord and the information provided say. How many are there? If a change is to be brought in for the persons in Scotland, presumably another full consultation will take place to precede any further regulations.

Finally, to repeat the question of the noble Lord, Lord Young, and the noble Earl, Lord Russell, the decision to introduce the scheme was taken on 28 December. There has been plenty of parliamentary time for this half-hour debate to take place, so could we have the actual reason why it was delayed so long?

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their valuable contributions to this debate.

I will start with the points made by my noble friend Lord Young and the noble Earl, Lord Russell. On the small numbers of people excluded, if an individual is entitled to pension protection under the Electricity (Protected Persons) (Scotland) Pension Regulations, they are not in scope for the changes in the NDA group. Whether an individual has this protection will depend on whom they were employed by and the pension scheme that they were eligible to be a member of in March 1990. The Government have reserved their position to keep this under review.

I think that every noble Lord rightly raised the delay in bringing forward these provisions. It was not that we could not find 20 minutes of parliamentary time over six years—if that were true, my noble friend would have a very valid point—but that we did not get the primary powers we required, as he will recall, until the Energy Bill was enacted late last year. It was entirely a result of needing the primary powers before we could make these changes, not a lack of parliamentary time. A great many other measures were held up due to lack of parliamentary time, but that was not the reason for the delay here. My honourable friend the Minister for Nuclear in the other place met the trade unions last year to discuss the NDA provisions in the then Energy Bill. They noted that they were also concerned about the length of time but, when the delay was explained, they were broadly understanding of the reasons.

On the £200 million of savings, despite the delay in the introduction of this legislation, we estimate that the level of savings remains broadly accurate. The exact level will depend on the change to pension arrangements and will vary depending on when members of staff retire, but we still believe that the savings will be significant, of the order of £200 million.

The number of staff affected—broadly 8,000—remains the same. Employees affected were aware of the changes due to be enacted as of April 2024, and there has been a great deal of communication during the last year, including a website set up for those affected. If changes are required to schemes not covered by these regulations, such as schemes in Scotland, that would require further consultation. The Government remain committed to ensuring that public sector pension reform proceeds in line with the 2011 review of the noble Lord, Lord Hutton. These regulations are essential to the success of the implementation of CARE-based pension reform in the NDA group in accordance with broader public sector pay policy.

Reflecting back, it is evident that the complexities of the NDA group’s pension schemes required tailored reforms. Engagement with the trade unions resulted in a bespoke career average revalued earnings scheme, aligning with the broader public sector framework and maintaining valuable benefits for its members. Furthermore, the reform preserves commitments to those excellent benefits, notably including provisions for members to retire at their current retirement age, as I said in opening, which for the majority will be 60. These measures will align NDA group final salary pensions with wider public sector standards, ensuring fairness and efficiency, yielding substantial financial savings and bolstering the NDA’s mission of responsibly decommissioning the UK’s nuclear legacy. I think I have answered all the points put to me—

Civil Nuclear Road Map

Lord Lennie Excerpts

Monday 15th January 2024 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I thank the Minister for the Statement and wish him and his colleagues as happy a new year as possible, in the circumstances.

Nuclear energy is a key part of Britain’s future energy mix. We therefore support the Government’s commitment to new nuclear power. Nuclear power is a long-term project that requires cross-party consensus. I confirm that, as far as we are concerned, we have it. It is not new that we have a need for more homegrown, clean power in this country to cut energy bills and give us energy security, but the vulnerabilities of the current system have been deeply exposed by the energy bills crisis and the invasion of Ukraine, showing our reliance on external supply over the last two years.

Although this latest commitment is welcome, it is something of an irony that this road map emerged from Chris Skidmore’s independent review of net zero. Given the reason for his resignation being the lack of progress by the Government on energy and climate policy, particularly the Offshore Petroleum Licensing Bill, do the Government not find it counterproductive to be taking one step forward and one step back at the same time?

Given this history, one would understand the nuclear industry being at least sceptical of the commitments in the Government’s Statement. What concrete steps are the Government taking in the short term to give the industry the confidence to work alongside them to deliver what the road map offers?

Furthermore, it is disappointing that, over the past 13 years, progress has stalled under this Government. They came into power in 2010, with 10 new sites having been identified by the previous Labour Government, yet they still have not managed to complete one nuclear power station. Even this newly promised road map is coming two years later than promised. That is two extra years when people will not feel the benefits. However long it takes for bills to fall as a result of the Government’s long overdue realisation that we need to generate more clean electricity, it will be two years later than it could have been. None the less, do the Government have a timeline for when that will happen? What assessment have they made of the expected impact of bills in the longer terms?

While of course it is a road map for 2050, the report also sets out a number of steps to be taken in the next 12 months. One of these is publishing a nuclear skills task force report alongside a defence nuclear enterprise Command Paper. Regarding the former, can the Minister give us a preview by telling the House what steps are already being taken by the Government to ensure that the UK retains critical skills in our nuclear sector? These jobs are highly skilled, well-paid, unionised and an asset that should be protected and treasured right through the supply chain, from apprenticeships to nuclear physicists.

Another step in the next 12 months is to finally reach an investment decision on Sizewell C, before the end of this Parliament. That commitment is also welcome, but for Hinkley Point C there is less certainty. Will the Minister update us on the timeline for Hinkley Point C, which was originally promised to be delivered by 2017, seven years ago? When will it start supplying power to households?

Finally, also said to be happening in the next year is completing the Great British Nuclear-led SMR technology selection process, thus announcing which technologies will be supported to achieve final investment decisions by 2029. There is much frustration in the industry, where attempts to site SMRs face delays and blockages. What steps will the Government take to unblock this and widen the development of SMRs and other advanced technologies?

[Earl Russell (LD)]

My Lords, I thank the noble Lord, Lord Lennie, for his contribution. This road map is overdue but at least it is here. The question is: will timely financial investment and industry participation follow? The Liberal Democrats recognise that nuclear energy has always been part of our energy mix and will continue to be so as we transition away from fossil fuels.

The road map creates new risks and does little to provide energy security in the medium term. It sounds very glorious to meet one-quarter of our electricity demands by 2050, but will it deliver? It is a bit of a curate’s egg. On these Benches, we think that the Government are putting too many of our energy eggs in the “grand nuclear gigawatt energy infrastructure projects will always deliver” basket. Gigawatt nuclear energy projects have a long history of being announced with much fanfare, running into a blizzard of problems, becoming delayed, being delivered late and way over budget or not being delivered at all. The reality of nuclear projects in the UK is that Hinkley Point C is well over budget, now £33 billion, and late. Little progress has been made on Sizewell C, despite years of discussion and attempts to find ways to finance it.

The current proposed financing package charges already hard-pressed consumers up-front. Why will it be any different this time? This strategy requires the extension of four AGR nuclear power plants beyond their planned end of life and is subject to regulatory approval. When does the Minister expect the regulators to take these decisions? Mini reactors should be explored, but this should be as well as, not instead of, investing in renewable energy.

If planning and regulatory processes can be streamlined for nuclear, surely that can be done for offshore and onshore wind. We welcome the £300 million invested to free the UK from energy dependence on Russian advanced nuclear fuels. This is critical to our security. When does the Minister expect that the UK will be totally free from Russia? The Government must be able to give a true account of the costs of nuclear decommissioning.

The future is renewable. By 2030, technology improvements could slash today’s prices by one-quarter for a wind and half for solar. Other technologies, such as long-term storage, are also promising. The Liberal Democrats are committed to ensuring that 80% of the UK’s electricity is generated by renewables by 2030. The UK Government are aiming to decarbonise Great Britain’s electricity system fully by 2035, yet they have not provided a coherent strategy to achieve their goal. Investment in renewables and green technologies is essential. How do the Government plan to integrate the nuclear road map with their renewables ambitions? Given the scale of renewables that the Government are planning, inflexible nuclear base load systems are an ill fit. We need the flexibility provided by technologies such as interconnectors, storage and demand flexibility. Finally, when will we see a full and comprehensive integrated energy strategy to achieve net zero with a clear road map for renewables?

Hydrogen Heating

Lord Lennie Excerpts

Monday 11th December 2023 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes a very good point. We will of course fully consider those recommendations alongside the views on hydrogen heating.

[Lord Lennie (Lab)]

My Lords, newspaper reports at the weekend suggested that the Government were looking for an entire town to use as a hydrogen heating pilot. Given the difficulties in Whitby and Redcar, referred to by the noble Baroness, Lady Sheehan, which are not yet resolved but will be very soon, and recent scientific developments, which she also referred to, about indirect warming from hydrogen emissions being higher than previously thought, does the Minister think that now is the right time to be pushing ahead with this?

[Lord Callanan (Con)]

The noble Lord will find out whether now is the right time to be pushing ahead with it when we announce the decision. He should not necessarily believe everything that he reads in the newspapers.