Energy Bill [ Lords ] (Sixteenth sitting)

Alan Whitehead Excerpts

Committee stage
Tuesday 27th June 2023 Public Bill Committees

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

In his reply to my hon. Friend the Member for Bristol East, will the Minister expand briefly on his understanding of the meaning of the word “pause” in relation to the forcible installation of prepayment meters by energy companies? As far as I am aware, there is no time set for that, nor is it subject to any other actions that the Government may take. Is it the Minister’s understanding that the pause is strictly time-limited and that practices may start again at the end of it?

[Andrew Bowie]

The pause will be until Ofgem has finalised the review of supplier practice in relation to prepayment meter customers. That is what we expect, anyway, because in addition to what I have said this morning, the Secretary of State has told Ofgem to toughen up on energy suppliers and to investigate customers’ experiences of how their supplier is performing. Following that, Ofgem established a new customer reporting system for households to pass on their experiences of how they are being treated. We are approaching this across the board. We believe, however, that any ban on the forced installation of prepayment meters would risk a build-up of customer debt. Unpaid debts increase costs for all energy consumers and could pose a risk to supplier stability.

To address issues around the forced installation of prepayment meters, Ofgem has recently published a new code of practice, as I mentioned. The code has been agreed with energy suppliers to improve protections for customers being moved involuntarily to a prepayment meter. It ensures better protections for vulnerable households, increased scrutiny of supplier practices, and redress measures where prepayment meters were wrongly installed. It includes provisions to prevent involuntary installations for all high-risk customers, including those dependent on powered medical equipment, people over 85, and households with residents with severe health issues. It also includes a requirement for suppliers to reassess whether prepayment remains the most suitable and preferred payment method for a customer once they have repaid debts. Suppliers must agree to any request from a prepayment customer who is clear of debt to move off a prepayment meter.

The rules to which suppliers must adhere regarding the installation of prepayment meters are set out in the licence conditions set by Ofgem as the independent regulator. Ofgem will undertake a formal statutory consultation process to modify suppliers’ licence conditions in line with the code ahead of this winter. This will allow Ofgem to use its full enforcement powers to enforce compliance with the code, ensuring that consumers are protected and that the poor practices that we have seen will not happen again.

It is vital that, as the independent regulator, Ofgem continues to set the rules to which energy suppliers must adhere in licence conditions. New clauses 2 and 38 would risk taking that power away from Ofgem. Allowing the Government to set rules outside the licence conditions would threaten Ofgem’s independence and its ability to regulate suppliers effectively.

The Government have always been clear that action is needed to crack down on the practice of forcing people, especially the most vulnerable, on to prepayment meters. We will continue to work closely with Ofgem and industry to see that the code leads to positive changes for vulnerable consumers. I hope that hon. Members are reassured by my explanation and that they might feel able to withdraw their new clauses.

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Brought up, and read the First time.

[Dr Whitehead]

I beg to move, That the clause be read a Second time.

We come now to something that has run as a bit of a leitmotif through our discussions in Committee, which is the position of the North Sea Transition Authority—I was going to say the “so-called” North Sea Transition Authority, but I accept that it is the North Sea Transition Authority. However, as we have pointed out in previous debates, the name came about by means I am not entirely clear about, as opposed to being set in legislation.

In a previous debate, we discussed the circumstances under which somebody might go about their daily business calling themselves a particular appellation but find out that there were legal consequences to using a name that was not actually theirs, even though for daily purposes that name was reasonably accepted. That is the key point as far as the North Sea Transition Authority is concerned, because legally the North Sea Transition Authority is actually the Oil and Gas Authority. It is not just legally the Oil and Gas Authority; it is an authority that was effectively set up by the Energy Act 2016.

If we turn to the pages of the 2016 Act, we see a number of functions that the OGA must undertake. It is not the case that the OGA did not exist at all in any form prior to the 2016 Act’s passing into law; it was originally incorporated under the Companies Act 2006 as the Oil and Gas Authority Limited. The 2016 Act made a particular point of taking that limited company and transforming it by legislation. It states:

“The company originally incorporated under the Companies Act 2006 as the Oil and Gas Authority Limited is renamed as the Oil and Gas Authority.”

There it is in the legislation. The 2016 Act then made a number of transfers of functions from the OGA: the transfer of property rights, staff and so on. It is fairly clear from that that the Government at the time of the passage of the 2016 Act had a very real intention as to the function, activity and so on of the Oil and Gas Authority: they set it all out in the legislation. They were clear and specific on that. They were also clear and specific on what the OGA should be doing.

It was not just guidance on what the OGA should be doing; it was set out in the legislation under section 8, “Matters to which the OGA must have regard”. It needed to

“minimise public expenditure relating to, or arising from, relevant activities.”

It was concerned with the

“need for the United Kingdom to have a secure supply of energy.”

It had a function entitled “Storage of carbon dioxide”, and the OGA needed to

“work collaboratively with the government”.

By the way, regarding a debate we will come to later, the OGA also had at least an implied function with respect to the maximum economic extraction of oil and gas from the North sea. It was clear that the OGA had a number of things it should do, and that it was able to collect samples and regulate the oil and gas industry in the North sea, all within the overall umbrella of maximising economic recovery of that oil and gas in the North sea and elsewhere.

The OGA had a clear set of legal requirements and a clear set of duties and responsibilities, but the Government’s decision—I do not know whose decision it was, and it would be helpful if the Minister clarified that for me—that, henceforth, the OGA should be called the North Sea Transition Authority was, as far as I can see, conceived and carried out on no legal basis whatever. It was simply a device, which I guess aligned with the North sea transition deal, which was originally entitled the North sea oil and gas deal, whose title was, during discussions on the deal, so I understand, changed. That was when the Government had an industrial strategy, and this was put forward as a strategy for oil and gas in the North sea, although it also included elements of what we might say was a transition.

The North sea oil and gas companies undertook to change their position on flaring, for example, and undertook to do various things about the electrification of the North sea oil rigs and various other things. However, notably in the North sea transition document, there was no mention of, nor any agreement on, the management of production in the North sea, or indeed management of exploration or any other activities that were going on. This was a limited document that might be described as a North sea transition document, and an even more limited change to the name of the North sea OGA, which was renamed the North Sea Transition Authority. I presume that the name change arose from the basement of the Department for Business, Energy and Industrial Strategy as a nod in the direction of that particular document, but that is all.

The North Sea Transition Authority has done some mighty work in respect of its new function. It has changed its notepaper, I think—it has got that bit sorted out—but nothing else has happened as far as the authority is concerned. As the Minister saw just recently, and as I have periodically pointed out as the Committee has progressed, when the guidance notes and the notes published by the Department on various aspects of the Bill appear, we see that the North Sea Transition Authority is doing various things related to various aspects of the Bill. However, when we go into the clauses in the Bill, we see that it is not the North Sea Transition Authority that is doing those things, but the Oil and Gas Authority, because that remains the legal arrangement.

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Following those explanations, I hope that the hon. Gentleman feels that he can withdraw his new clause.

[Dr Whitehead]

Indeed there is a feeling welling up in me that we are not able to proceed with the new clause, given that the Minister said—and I agree—that such a change cannot be made easily with a quick stroke of a pen, and that a number of other things need to be considered alongside that. I am pleased that he indicated that, as we speak, there are serious people with towels round their heads working through the implications and looking at how we can best do it. That was the intention of the new clause, but perhaps I was rather optimistic in thinking that the name change could be written in easily. I appreciate that it cannot.

I also appreciate that the transition authority has the green light from Government to start undertaking things relating to transition. It is beginning to pursue that, and that is all good, but I say gently to the Minister that at some stage we will need to push this together. If the gentlemen with wet towels round their heads—

[Andrew Bowie]

And ladies.

[Dr Whitehead]

And ladies, indeed. If they can undertake their work in a reasonable fashion, I hope we will have a solution that is good for all of us, as far as the transition is concerned. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 44

Maximum economic recovery in the North Sea

“(1) The Petroleum Act 1998 is amended as follows.

(2) Omit sections 9A to 9I.”—(Dr Whitehead.)

This new clause removes reference to Maximum Economic Recovery in the North Sea as placed into the Petroleum Act 1998 by section 41 of the Infrastructure Act 2015.

Brought up, and read the First time.

[Dr Whitehead]

I beg to move, That the clause be read a Second time.

New clause 44 concerns a similar legislative requirement—this time, not in the Energy Act 2016, but in the Infrastructure Act 2015. The 2015 Act—I know that hon. Members will have it at their bedsides at all times—contains what can only be described as a performative piece of legislation. Section 41 makes an extensive amendment to the Petroleum Act 1998, which worked perfectly well in supporting the development and activity of the North sea basin, to introduce a principal objective of

“maximising the economic recovery of UK petroleum”—

interestingly, that is not defined in the legislation—through

“development, construction, deployment and use of equipment,”

collaboration among various persons, and so on.

Section 41 also states that the Secretary of State

“must produce one or more strategies for enabling the principal objective to be met.”

There is a requirement on the Secretary of State,

“As soon as practicable after the end of each reporting period,”

to

“consider the extent to which, during that period, these persons have followed section 9C by acting in accordance with the current strategy or strategies,”

and to

“produce a report on the results of the consideration of that question.”

The section goes on to state what the report must contain, and to provide that the Secretary of State

“must publish, and lay before each House of Parliament, a copy of each report produced under this section.”

I have one initial question for the Minister: where are the reports? I have looked quite hard in the Library and various other places to find copies of the reports that the Secretary of State was supposed to produce in each reporting period, and to identify what considerations he or she made in terms of licence holders and operators under petroleum licences and so on. It is probably a case of me being a little remiss, but I cannot find those reports on the maximisation of the economic recovery of UK petroleum, several of which should have been produced by now, since they are supposed to be produced at the end of each two-year reporting period.

Far be it from me to suggest that the Secretary of State is in breach of his requirements under the 2015 Act. I am sure the Minister can put me right about whether the Secretary of State is in breach and either point me to the reports or, perhaps, suggest that they might be forthcoming. I hope the Minister has received inspiration that may enable him to address that point.

Even at the time, section 41 of the 2015 Act appeared to be rather strange in definitional terms. What would lead the Secretary of State to consider that the economic recovery of UK petroleum has been maximised? Is it the extraction of every last drop of petroleum and gas from the North sea—and, if so, over what timescale? It is unclear. Presumably, if economic circumstances change and make further North sea extraction economical, the Secretary of State and industry should start busily extracting everything that is economically extractable, even though in the future it may not be regarded as such.

Section 41 is a bit of a nonsense, and of course it is a much bigger nonsense now than it was, because the Government have solemnly agreed to our net zero targets and amended the Climate Change Act 2008. Indeed, the amendment of those targets was agreed after the 2015 Act was passed. We now have targets for our country’s future emissions, as well as legislation that essentially says that we are required to do the opposite of those targets through oil and gas extraction in the North sea.

As I am sure the Minister is aware, one important calculation in reaching net zero—indeed, the Government have introduced a net zero calculator—is whether at least some extraction of oil and gas from the North sea contradicts the net zero target. We have had a number of assessments, including from the Climate Change Committee and various other bodies, that maximising the economic extraction of oil and gas from the North sea would undoubtably bust our targets, and that we must be clear that at least some of it probably needs to be left there. If we sucked the North sea and other places dry of their oil and gas resources, depending on how we accounted for it, that would pretty much inevitably bust our ability to reach our targets. The objective to maximise economic recovery sits in stark contradiction to our overall emissions targets.

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[Andrew Bowie]

I could not agree more that there are financial risks. That is probably why, just this morning, so many businesses expressed their worry at Labour’s Just Stop Oil plans, which were outlined a couple of weeks ago and which the former Labour leader of Aberdeen City Council described as even worse for an industry than the actions of Margaret Thatcher in the 1980s. That is from a member of the Labour party who resigned due to Labour’s policies on oil and gas.

[Dr Whitehead]

I would be grateful if the Minister withdrew that comment about Labour’s “Just Stop Oil plans”. There are no Labour Just Stop Oil plans. Indeed, Labour has condemned the activities of Just Stop Oil protesters, because Labour does not wish just to stop oil. We specifically said this morning that we do not wish to do that, and that we see a substantial role for the North sea oil and gas industry out to 2050. We would support that future, so I hope the Minister will not resort to these easy gibes and will address the issue rather more seriously today. That would be helpful.

[Andrew Bowie]

I should probably turn to the new clause, but I welcome the welcome and support that the hon. Gentleman—and now, it seems, the Labour party—will give to our offshore oil and gas industry. He should probably inform the members and founders of Just Stop Oil who have donated so much money to his party.

The objective of maximising economic recovery in the North sea forms the basis of the North Sea Transition Authority’s regulatory functions, and removing them could significantly undermine its ability to operate as intended. It would also lead to a significant lack of clarity about the authority’s regulatory role. Maximising the economic recovery of oil and gas need not be in conflict with the transition to net zero, and the North Sea Transition Authority is already doing a great deal of work to support an orderly transition that delivers on our climate commitments and supports workers.

In December 2020, in accordance with section 9A of the Petroleum Act 1998, the North Sea Transition Authority published a revised strategy, titled “The OGA Strategy”.

[Dr Whitehead]

Ah!

[Andrew Bowie]

It is rather ironic, given what we have just been discussing. Through the revised strategy’s central obligation, the North Sea Transition Authority must

“secure that the maximum value of economically recoverable petroleum is recovered from the strata beneath relevant UK waters; and, in doing so, take appropriate steps to assist the Secretary of State in meeting the net zero target”.

The strategy therefore already provides a basis for the North Sea Transition Authority’s ongoing work to help drive the energy transition.

Under the revised strategy, the North Sea Transition Authority has also introduced new expectations for how North sea oil and gas assets will be managed in the least polluting way, and it will consider the full societal carbon cost when taking decisions. The North Sea Transition Authority will continue to work with Government, industry and other regulators to help accelerate the move to net zero while meeting the UK’s energy demands and need for energy security.

Section 9D of the Petroleum Act 1998, on reports by the Secretary of State, was repealed by paragraph 10 of schedule 1 to the Energy Act 2016, which means the repeal happened before any reports needed to be produced.

I pay tribute to our offshore oil and gas industry, particularly Offshore Energies UK and its “Vision 2035” plan, which means the North sea will become the world’s first net-zero basin. With these explanations, I hope the hon. Gentleman feels able to withdraw his new clause.

[Dr Whitehead]

I thank the Minister for clarifying the position on reports, because I must admit that I had not read that paragraph of the 2016 Act. It rather underscores my point that this is a performative piece of legislation. There were requirements to report, but the Government presumably realised that they were even sillier than the original imposition on the 1998 Act and decided, one year later, that reports would not be necessary. It could have been a bit embarrassing if the reports came out, so they decided that the reports were not necessary. I thank him for that clarification, but he is rather speaking to my point instead of his.

I am very disappointed that the Minister has sought to characterise our debate as one side of the Committee being against oil and gas and the other side being in favour; he thereby swerves the important point raised by my hon. Friend the Member for Sheffield, Hallam. On the overall position that maximum economic extraction could lead us—