Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments 2022

Alan Whitehead Excerpts

Monday 21st November 2022 General Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

It is a pleasure to serve under your chairmanship, Mrs Murray. We seem to be meeting far too frequently these days.

These regulations put right a substantial loophole in the arrangements set out under the energy price assistance schemes. This loophole concerns people who do not pay their energy bill directly—where, for instance, it is paid through an intermediary, such as occupiers of park home schemes. The park home scheme will pay the bill and also get the relief from that bill. It also applies to district heating operators, which are essentially retail companies that pass on to their customers what they have managed to negotiate for the cost of the heat and bill them accordingly, as an intermediary.

All those categories of consumer are in danger of not getting the relief that should be guaranteed under the energy price support schemes and, for businesses, under the energy relief scheme. These instruments attempt to rectify that loophole across the board. It is quite right we should do that and pass these regulations through, and they should operate as soon as possible. These are to come into force the day after they have been laid, so hopefully those schemes can get going as soon as possible.

However, the design of the SIs is really not good enough to deal with the problems that I am sure hon. Members have already heard about, having received letters and correspondence from their constituents. People in very vulnerable circumstances, such as those in park homes or sub-let rented accommodation, have not had a penny of the money that is supposed to be coming their way, and they are still waiting for it. Often they are in very difficult circumstances.

How do the SIs make the payment work? They place a requirement on the intermediary to pass through the payments that it may have received, so that they go to customers in the end. I am talking generally about the regulations, because there are slightly different ways of doing it in different regulations. In general, they require the intermediary to provide a “fair and reasonable” pass-through of what it has received for bills in the first instance. It is not necessarily the whole amount, but a “fair and reasonable” amount, which is not defined in the regulations. That potentially gives rise to enormous complications, because it is not clear what a “fair and reasonable” difference is between what an intermediary has received and what a customer will actually get in the end.

It may be that “fair and reasonable” means that the intermediary has tried to protect the customer from the full increase in the bills in the first place, and could therefore say, “As far as ‘fair and reasonable’ is concerned, I am deducting what I have already protected you, the customer, from in terms of the increase and what I have charged you, and I am going to keep some of that for myself. What I give to you is fair and reasonable.” However, it is very difficult to determine accurately what is “fair and reasonable” under those circumstances, what administrative costs the intermediary has removed from the process in order to be “fair and reasonable”, and so on. There is potentially a big difficulty in implementing the scheme.

From a legal point of view, the second big difficulty arises from the way that the schemes have been set up, because there is no sanction on the intermediary for failing to do what it is supposed to do. According to the regulations, it is supposed to pass the costs through, but if it fails to do so, the customer’s only redress—certainly according to the EPRS part of the schemes—is to take civil action through the courts. The Department has kindly produced some standard letters that customers in that position can send off, but it is difficult to easily conceive of an efficient method for people who are perhaps dealing with a dodgy landlord, who may have, as the Secondary Legislation Scrutiny Committee in the other place calls it, an inequality of force of arms. It is very difficult to imagine that there will be any sort of an equal contest between the owner of a park home scheme and a person who has not received any money at all, or who has perhaps received some of the amount but has been brushed off on the grounds that it is “fair and reasonable” to give them only a proportion of the money that is passed through.

It is difficult to see how redress through the civil courts would work in practice. Even though they theoretically have the possibility of redress, the person at plot 38 in a park homes scheme may be no more likely to sue their own landlord for that money than to fly to the moon. There is no sanction as such in the regulations, so the intermediary can probably get away with it while those sums are coming forward to various people. They may face no real sanction for that money not passing through, other than various people saying, “You really ought to pass the money through over a period.”

The way the regulations are structured does not fill me with confidence that they will close the loophole about which we are all concerned. However, in the case of district heating arrangements, the intermediary is in a different position from the intermediary in the case of park home owners, landlords of multiple-occupied houses, and so on. In district heating arrangements, the intermediary receives money under the energy bill relief scheme—that is, the non-domestic, commercial part of the scheme. What is passed on to the customer will therefore not be determined by the energy price cap, but the customer should have passed on to them an appropriate element of what the intermediary in the scheme received.

That, again, is difficult to determine, which may be why, in that particular scheme, recourse in the first instance is to the energy ombudsman rather than legal action through the courts. That is a provision of that particular part of the overall schemes, but there is no reference to the energy ombudsman in the main scheme: a person either gets their amount of relief, or applies through the courts. I do not know why that distinction has been made. It may be because of the nature of the scheme, that is, the indeterminate amount of money that a person might receive, the reference to the business scheme, and the resulting relationship of the intermediary to the final customer. Perhaps the Minister will say that there is a particular part of this scheme that enables the Government to bring the recourse of the ombudsman’s office to bear on this part but not on the other part of the scheme. It may be that the Government have just forgotten to include that recourse in the other scheme, or it may be that there are good reasons for not doing so. I would be grateful if the Minister was able to provide clarity on that. It may be necessary to write to me, but if the Minister has a great inspiration, that would be good.

Frankly, this scheme is unlikely to solve all the problems of pass-through that we have been discussing. It therefore behoves the Government to monitor very closely how the scheme is working in its early days or months, so that we can see at an early stage whether things are going wrong, the pass-through is not happening or people are wilfully using the “just and reasonable” clauses of the arrangement to deny customers proper pass-through. If those abuses are happening, we should be able to pick them up very quickly and take action to stop them by either changing or extending the scheme. Does the Minister have any plans to do that? If not, can he assure me today that the Department will monitor the scheme and report back to this place at an early stage so that between us we can see whether it is working as well as it should? If it is not, we can work out better remedies to make it work in the long term.

We are not opposing the measures today because it is important that they get going, but we reserve our position on whether they will be a great success. We wish to see the Government recognise that there might be problems in the scheme as we go ahead and that, if necessary, they are prepared to do something about it.

--- Later in debate ---

[Kevin Hollinrake]

I thank right hon. and hon. Members from across the House for their comments. I will address the points made by the shadow Minister first. He is right to point out some of the deficiencies in the scheme, in that there is great diversity in the number and type of intermediaries. Ideally, we would have liked one ombudsman that covered every sector; instead, we have park home site owners, landlords, electric-vehicle-charger operators and heat-network operators all having different ombudsmen, or sometimes an absence of any ombudsman. That is the challenge behind the measures we are putting in place.

The other challenge is having to design a scheme of such complexity at pace, with a diversity of suppliers and intermediaries. I gently challenge the shadow Minister on the point about park home residents, or people from a different cohort, not having got a penny yet. That should not be the case. Most landlords and park home site operators are decent people who will be doing the right thing and trying to help their residents through a very difficult time. This instrument just legalises and formalises the process. Often in this place we try to legislate to ensure that everyone is responsible for doing the right thing.

The shadow Minister asked about vulnerable customers, as did some other Members—not least my right hon. and learned Friend the Member for North East Hertfordshire. We have engaged extensively with consumer groups, representative organisations, Citizens Advice, local authorities, food bank operators, faith groups and some of the operators behind the park home associations to try to ensure that people are aware of the requirements on them to pass on the support provided.

Heat networks are a separate cohort and an exception in this whole discussion because they are already covered by the energy ombudsman; it is therefore easy to make them accountable to the energy ombudsman. Landlords do not have that kind of relationship with the energy ombudsman, or with any ombudsman. The Government have put forward a consultation and they intend to ask all landlords to be members of a redress scheme. I would have welcomed that move because it would have made the scheme far easier to implement. But at the moment that has not happened, so we have to make these measures subject to the courts. That is the only available method.

[Dr Whitehead]

I am a little puzzled by this. The ombudsman to whom we are referring is the energy ombudsman, and the energy ombudsman has standing as far as all matters pertaining to energy are concerned. Although I agree that the particular circumstances of intermediaries are different, they are all bound by the fact that the issue is about energy, so the energy ombudsman should have traction as far as those different cases are concerned. My concern that the energy ombudsman appears to act where heat is concerned, but not where electricity is concerned, has not been assuaged. Can the Minister expatiate any further on why that difference is there?

[Kevin Hollinrake]

I share the hon. Member’s concerns, but I can only reiterate that the energy ombudsman does not cover landlords. Landlords are not regulated by the energy ombudsman, so there is no recourse to the energy ombudsman. There has to be a relationship between the two. As I have said, moves are afoot to deal with the issue, but if the Opposition have ideas on how we do this more effectively they should write to us, and we can write back to them to say why not.

The shadow Minister asked for sanctions for people who do not comply, but we do not see any way to impose sanctions without regulations having been in place before the scheme was brought to bear. For all those reasons, I think it is not possible to do what he wishes, but as I say, if he has some ideas on how we might, he should write to us.

My right hon. Friend the Member for North West Hampshire made some very good points about care homes, and how their residents will benefit from the scheme. If service charges include energy provision, it would be just and reasonable to pass on the benefits of the EPG or EBRS to those residents. Although we do not want to see residents having to take landlords or the people who provide their accommodation to the courts, I think the courts would take a very dim view if the support had not been passed on to those residents.

My right hon. Friend the Member for North West Hampshire made another good point. What about if someone had been parsimonious and reduced their energy use? Would they still see the benefit? The Government support, as he knows, is provided on a per kilowatt-hour basis, so we would expect support to be passed over on that basis. If someone has done the right thing and reduced their energy use, they should see the full benefit of that, both in terms of the reduction— the energy they have not used—and the cost covered by the various schemes that apply.

On the point about “as soon as reasonably practicable”, I would expect the courts to take a dim view of somebody who had pocketed the money for 60 days and let the interest pile up.

--- Later in debate ---

[Kevin Hollinrake]

My hon. Friend raises an interesting additional complexity, which I am not sure is dealt with in the regulations. However, again, there will still be a requirement for the administrator to pass on the benefit in that circumstance, I guess. That might be something I can discuss with officials and write to my hon. Friend about, if he is sufficiently concerned.

My right hon. and learned Friend the Member for North East Hertfordshire made a point about engagement with landlords. As I have said, we have done that, and we are certainly very concerned about the passing-through in all these schemes, particularly to the vulnerable. That is why we are working with organisations such as Step Up, Citizens Advice, charitable groups and food banks to make sure those people are sufficiently supported and that benefit is passed on to individual residents.

[Dr Whitehead]

I suspect the Minister has moved on from addressing my particular concerns, but one question I did raise was the extent to which the Department is monitoring the success or otherwise of these changes. What actions might the Department take to indicate whether they consider the scheme to be a success or not, and if not, whether they want to do anything about it? Is the Minister able to say tonight that after, say, a two or three-month period, he will make a statement to the House—not necessarily an oral statement; it could be a written statement—about what the Department thinks is happening with these schemes and, if it finds adversely as far as their success is concerned, what it might do about it?

[Kevin Hollinrake]

The hon. Gentleman makes a very fair point. We will always keep this matter under review, and there are many different ways he can choose of holding the Government’s feet to the fire for doing that through their Departments. There are many different mechanisms for that, which I do not need to outline to him. However, I can absolutely make a commitment to the hon. Gentleman that myself and my colleagues in the Department will make sure that these measures are effective and do what we want them to do. Of course, we always have the opportunity to refine our approach through legislation if we do not feel it is working as it should.

In conclusion, the regulations protect those who are most exposed to high energy costs. The pass-through requirements allow cost savings to reach the people that the Government intend to support, such as tenants and other individuals. Importantly, the regulations also provide routes for end users to benefit from the discount they are entitled to in scenarios where intermediaries are not meeting their legal obligations. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1101).

ENERGY BILLS SUPPORT SCHEME AND ENERGY PRICE GUARANTEE PASS-THROUGH REQUIREMENT (ENGLAND AND WALES AND SCOTLAND) REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bills Support Scheme and Energy Price Guarantee Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1102).—(Kevin Hollinrake.)

ENERGY BILL RELIEF SCHEME PASS-THROUGH REQUIREMENT (ENGLAND AND WALES AND SCOTLAND) REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 (SI, 2022, No. 1103).—(Kevin Hollinrake.)

ENERGY BILL RELIEF SCHEME PASS-THROUGH REQUIREMENT (HEAT SUPPLIERS) (NORTHERN IRELAND) REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Northern Ireland) Regulations 2022 (SI, 2022, No. 1124).—(Kevin Hollinrake.)

ENERGY BILL RELIEF SCHEME AND ENERGY PRICE GUARANTEE PASS-THROUGH REQUIREMENT AND MISCELLANEOUS AMENDMENTS REGULATIONS 2022

Resolved,

That the Committee has considered the Energy Bill Relief Scheme and Energy Price Guarantee Pass-through Requirement and Miscellaneous Amendments Regulations 2022 (SI, 2022, No, 1125).—(Kevin Hollinrake.)