Energy Bill Relief Scheme Regulations 2022 Energy Prices (Domestic Supply) (Northern Ireland) Regulations 2022 Energy Bill Relief Scheme (Northern Ireland) Regulations 2022

Alan Brown Excerpts

Monday 14th November 2022 General Committees

[Ms Ghani]

It is a pleasure to serve under your chairmanship, Sir Roger. I am doing my best to represent my right hon. Friend the Member for Beverley and Holderness (Graham Stuart), who is the Minister responsible for this brief. On a good or a bad day, I might look like him; I am not quite sure.

I will give some background to the regulations. The energy bill relief schemes, which I will collectively refer to as EBRSs, and the energy price guarantee—the EPG—have been introduced at pace to protect the public from the effects of soaring wholesale energy prices. The ERBSs are intended for those on non-domestic tariffs and the EPG for those on domestic tariffs. Unconstrained high prices would put significant financial pressure on UK businesses, charities and public sector organisations such as hospitals and schools. They would significantly increase the cost of living for households too. The wider negative effects of such economic pressure would be severe and materialise very quickly in the absence of an intervention of this kind.

The EBRS regulations for Great Britain, the EBRS Northern Ireland regulations and the EPG regulations have been created under the Energy Prices Act 2022, which gained Royal Assent on 25 October 2022. The regulations are essential secondary legislation required to implement the schemes.

I now turn to the detail in the EBRS GB and EBRS NI regulations. The regulations set out that, with few exceptions, all non-domestic customers with electricity and gas contracts from licensed non-domestic energy suppliers will be eligible for a discount. The discount will be applied to the wholesale price element of the bills, and the regulations set out how the discount has been calculated. The regulations cover the process by which the energy supplier is reimbursed by the Secretary of State for the discount. The regulations also give powers to the Secretary of State to delegate this function where appropriate. Further provision is included to prevent suppliers or customers from deriving greater benefit than is intended, to protect the integrity of the schemes. The regulations provide for an additional reduction to be applied for qualifying financially disadvantaged customers, who are supplied under the so called “deemed” or “out of contract” contracts.

The EBRS NI regulations prevent end users outside Northern Ireland from receiving a discount to their bills. Finally, the regulations cover essential operational matters including information, a reporting obligation, enforcement powers and powers to impose civil penalties in respect of missing or defective declarations.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Will the Minister give way?

[Ms Ghani]

Perhaps if the hon. Gentleman allows me to continue, I will answer his question. To accompany the regulations, we have published a suite of legally binding rules and non-statutory guidance, which provides further detail on how the schemes work.

I turn to the energy price guarantee. The EPG schemes in both Great Britain and Northern Ireland are intended for customers on domestic tariffs. The Energy Prices Act 2022 set out that EPG NI schemes are to apply to those with domestic electricity and gas supply. The EPG regulations define domestic electricity supply and domestic gas supply for Northern Ireland. Those definitions will mean that some non-domestic premises will be in scope of the energy price guarantee electricity scheme in Northern Ireland. That includes some places of worship that have similar metering and tariff arrangements to domestic premises.

These non-domestic premises will receive EPG support instead, since there was no timely way for energy suppliers to disaggregate them from traditional domestic premises with similar metering and tariff arrangements. Both the EBRS and the EPG remain a source of critical support for non-domestic and domestic consumers across the UK. The measures in these regulations are crucial for the effective operation of the EPG and EBRS, and the schemes will complement other large-scale support that the Government are providing for energy and the cost of living. I hope that the Committee will support these measures and their objectives.

[Alan Brown]

On the EBRS, can it be absolutely clarified that the discount is applied to a bill before the non-domestic customers have to pay the money to the supplier, or is it retrospective?

[Ms Ghani]

I think the answer is yes to the former, but when I make my concluding remarks I will ensure that the answer is word-perfect for the transcript. Without further ado, I commend the regulations to the Committee.

--- Later in debate ---

[Alan Brown]

It is a pleasure to serve under your chairmanship, Sir Roger. As the hon. Member for Southampton, Test said, we understand the need for the regulations, because we all want to see support for businesses and people in our constituencies, but there is a reason why this is so back-ended. When Ofgem was predicting what the price cap would rise to in October, with the Tory leadership contest going on, the outgoing Prime Minister said that he could not tie the hands of the incoming Prime Minister, so nothing was done at a critical period when businesses should have been consulted directly and involved. Things could have happened much quicker. Although the outgoing Prime Minister sai that he could not commit money, he committed £700 million of taxpayers’ money for Sizewell C, which will add to our bills.

While researching today’s measures, I came across the Regulatory Policy Committee’s assessment of the various impact assessments that have been undertaken regarding the Energy Prices Act 2022. The RPC report is quite damning. It shows just how much of a rushed job this has been. It rated the impact assessments undertaken for the legislation before us as “not fit for purpose”. Overall, according to the RPC, two categories are classed as red, two as weak and two as satisfactory. One of the things that the RPC highlighted is the lack of an overarching or umbrella impact assessment covering all of the individual impact assessments associated with the Energy Prices Act 2022. Will the Government look at that, and do an overarching impact assessment so that they fully understand all of the different strands that are coming together in these support packages? Ultimately, we can consider this the Government’s flagship policy at the moment, in terms of supporting businesses and people with their energy bills. The EBRS package is estimated at £29 billion in the impact assessment, but if the impact assessment is not deemed fit for purpose the Government need to understand that and quickly, as this is now being rolled out with huge sums of taxpayers’ money.

The RPC also highlights another bigger issue about energy consumption and its impacts: if people or businesses are shielded slightly from the full impact of the energy cost increases, they will actually use more energy as a consequence. There is a risk there. Anybody who heard the previous Prime Minister say, “Nobody will pay more than £2,500” will wrongly think that that is the limit, and may use too much energy. What will the Government do to assess the impact of that?

On the bigger picture of energy security and supply, there is talk that we may have to ration electricity. The National Grid ESO is looking at how to balance the grid, if need be, and reduce demand. The Government need to understand that there is a possible impact on businesses trying to access energy, when they believe it is in their interest because they are being supported, versus the ESO trying to manage peak demand. The RPC say that that is not being looked at, and going forward it is something that the Government must address.

In a similar vein, have the Government considered what will happen if companies and businesses choose to ramp up their business operations toward the end of the scheme? The scheme ends at the end of March 2023, so what happens if a business decides to say, “You know what, I’m going to go gung-ho. I’m going to go flat out. I’m going to ramp up operations, I’m going to ramp up manufacturing. Let’s get as much done as we can, because the Government and the taxpayer are supporting our energy usage, then we’ll slow down come April and maybe give people holidays.” Will that be considered an illegitimate use of the scheme, or legitimate access that would be deemed sound business practice? If it is the latter, how will the Government manage that before it is too late?

Why is there not a greater assessment of the impact of administration and resource costs on Ofgem, which will be heavily involved in monitoring compliance? That does not seem to have been undertaken either. Another issue that the RPC identified concerns landlords. Paragraph 9 of the impact assessment for the EBRS intimates that there will be “pass-through requirements”, where any intermediaries or landlords have to pass on the discount and benefits to the businesses renting the premises. Let us say that a landlord does not do that with the pass-through requirements: what is the mechanism for the Government to take action? What is the enforcement mechanism, and how will the Government do that? How will businesses highlight that? What is the reporting process for reporting to Ofgem or the supplier for the Government to ensure that they get the full benefit intended in terms of energy support for those businesses?

Another key question that I am trying to get my head round is highlighted in paragraph 7.2 of the explanatory notes. If a company has outstanding debt on bills of greater than 28 days it effectively does not qualify. How does that work? If it has any debt with a supplier that it has not managed to address, does it fall out of the scheme altogether, or is that the case only if it is debt on a bill that has had a reduction applied to it? If it still has not paid, will it fork out for future reductions? That is partly why I asked earlier if reductions are applied to the bills, rather than being applied retrospectively, once companies have paid. I am still trying to get my head round what happens about that if companies have debt, because that will be critical. Obviously, companies might have debt now because of cashflow issues, but the worst thing that could happen to a struggling business is that it does not get the support that it should get. That could send that business under.

On page 5, paragraph 10 of the impact assessment, we learn that legislative powers will be utilised to ensure that suppliers “offer reasonable contracts” and ensure that reductions take place. Again, it is a noble sentiment for the Government to want to cover that, but how will that work in reality?

Turning to the energy price guarantee, our constituents who live off the gas grid have been promised £100. I have long argued that the £100 one-off payment is completely insufficient, when the minimum delivery fee to fill a tank is £500 and the cost of filling a tank has more than doubled to roughly £1,200, so people just do not have the money. I have been contacted by an 86-year-old constituent who lives in a rural area. She has two tanks that she has to fill two or three times a year. She is worried about how she will afford that. She does not know how she will get the £100, so it would be good to have an explanation about when the £100 will be disbursed and how people can access it, even though it does not make much difference overall in terms of filling fuel tanks.

What assessment are the Government making of what people’s future bills will look like? The explanatory notes for the Energy Prices Act 2022 said that the support package, which was a two-year package at the time, was to prevent bills going up to an average of £4,200 per household. We now know the EPG ends on 31 March. The Chancellor said that it would be brought back to help vulnerable people, but what will an average bill look like for typical householders going forward? That is a real concern. It is not an exact science and there will need to be estimates for a range of prices, but it would be good for people to have some sort of idea about what the future will look like, because they need to start planning for that.

Finally, Sir Roger, I want to mention another aspect of the Energy Prices Act 2022: the decoupling of renewable energy generation from prices based on gas. When will the Government come forward with timescales for supernormal revenue proposals? When will we start to see that take shape? Are the Government undertaking an open consultation with energy trade bodies and energy generators? The RPC points out that we need to ensure that they do not disincentivise investment in renewables. We also need to look at what the EU is doing and the impact that EU schemes are having on electricity generation in terms of renewables, and we must make sure the Government understand that and either mirror or improve the EU scheme.

[Ms Ghani]

I thank hon. Members for their valuable contributions to the debate and for their understanding about the speed required to ensure that support is available in Northern Ireland.

Fundamentally, we are trying to provide a wholesale discount that could halve people’s bills, and that is what we are here to do. It is reassuring to know that the schemes are already in force and are delivering support to households and organisations across the UK. I hope that will go some way to assure the public that the Government are committed to taking decisive action against this energy crisis. We are confident that our non-domestic schemes will seek to avoid firm closures and redundancies, and ensure that vital public services and charities can continue to operate over the winter.

The scheme has been designed to operate robustly, and it guards against fraud and gaming. We will continue to monitor the scheme to ensure that support is provided to the people and businesses it is designed to help. We are committed to reviewing the scheme. We will consider how best to offer further support to customers who are most at risk from energy price rises beyond April 2023.

I will do my best to answer all the very sensible questions that were asked. If I do not respond to them all now, be assured that I will make sure that the appropriate Minister’s Department puts everything in writing. I am also very keen to answer the questions raised by Mr Brown, who normally asks for my resignation. This is a rare moment when he has not.

[Alan Brown]

I’m just waiting.

[Ms Ghani]

I will come to Mr Brown first—

--- Later in debate ---

[Ms Ghani]

Forgive me, Sir Roger; my apologies.

As mentioned, the discount will be applied before the business is billed. Another point was raised about the 28 days in arrears. All eligible customers will be eligible for the EBRS discount. The arrears point applies only to the extra discount. Suppliers will apply those to deemed or out-of-contract tariffs.

A valid question was raised about landlords. The Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 and the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022, which were laid before Parliament on 31 October and 4 November respectively, set out the requirements for intermediaries such as landlords to pass through the benefits of EBRS, the GB EPG and the GB energy bills support scheme to end users who, for example, pay for their energy through all-inclusive bills.

[Alan Brown]

I thank the Minister for giving way. What I was actually seeking was further clarity on the enforcement action the Government can take to actually ensure that that is happening and that those are being passed on. I am happy for somebody to write to me on that.

[Ms Ghani]

We will make sure that that is in writing. The regulations have been laid, but the hon. Gentleman is absolutely right; we want to make sure that those benefits are passed through.

A question was raised about the £100 payment, which comes on top of the £400 discount. This is what we are here to do today: to make sure that people have all the support they need. The regulations are here to support economic growth and ensure that firms do not close down and redundancies do not happen. The scheme is fundamentally there to support those people and public services. I believe that an impact assessment was published for the overall EBRS scheme across the UK, along with Energy Prices Act 2022. I will make sure that this is emailed to the hon. Member for Kilmarnock and Loudoun, as well, so that he can look at that.