Draft Contracts for Difference (Electricity Supplier Obligations) (Amendment) (Coronavirus) Regulations 2020

Adam Afriyie Excerpts

Monday 29th June 2020 General Committees

[Adam Afriyie (Windsor) (Con)]

I very much welcome this measure, which is a reasonable step given the current circumstances. I want to ask the Minister this question now, to give him time to reflect. If, during this period in which electricity suppliers have extended terms, one of them was to go out of business, what clawback mechanisms might there?

[Kwasi Kwarteng]

That is slightly outside the scope, but I understand where my hon. Friend is coming from. There are a number of measures that we would go into: there is the SLR—the supplier of last resort—and there are measures for mutualisation of cost. I also remind him that this happens every summer, regardless of covid. It is a highly competitive space, and a number of energy suppliers come in and out of the market at will, so this is very much in the run of ordinary business. This measure is related to the specific challenge of covid and to deferring payments in the way that he described.

Finally, the regulations enable the LCCC to repay any financial assistance provided by the Government, using moneys collected from electricity suppliers after the reconciliation process following the relevant quarterly obligation period. In effect, all we are doing is delaying the payable period so that it does not force energy suppliers to go out of business in the way my hon. Friend suggested.

I must stress that this deferral will give suppliers more time to prepare for the increase in payments and provide greater confidence about the level of additional costs they will face in the second quarter of 2021. I must also stress that the Government are committed to upholding the self-financing nature of levies in the energy system. There was no question of our providing some sort of grant or subsidy to the LCCC. We fully expect that whatever moneys are deferred will be paid eventually to the LCCC and that it will be able to sustain its function regardless of Government intervention.

These legislative changes are technical in nature. They needed to be made ahead of the LCCC’s quarterly reconciliation process, which determines suppliers’ obligations for the current quarter. That is expected on 9 July, at the end of next week. Subject to the will of Parliament, this instrument will enter into force the day after it is made. I commend the regulations to the House.