Draft Energy Bills Discount Scheme (Amendment) Regulations 2024

Alan Whitehead Excerpts

Tuesday 5th March 2024 General Committees

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

As the Minister has explained, the draft regulations make a lot of sense administratively and in respect of future costs to the Government. The explanatory memorandum sets out the cost of keeping units in place essentially forever, because there was not originally a cut-off date for applying for the scheme or for being liable for the consequences of registration. The explanatory memorandum mentions a sum getting on for £6 million as the administrative consequences of not doing something. From that point of view, the draft regulations make a lot of sense.

From the point of view of consumers, and indeed of justice, the draft regulations make rather less sense. Does the Minister have any thoughts on that? Is there anything she would consider doing to mitigate the negative consequences? I address that question to her because I know that as the scheme has progressed she has always been keen for customers to get the full discounts to which they are entitled. She and I have discussed methods of ensuring that that happens. I completely exempt her from my criticisms of the problems that we are likely to see, because I know that her intentions are absolutely in the right place.

Let us go back to the introduction during the energy crisis of the methods by which discounts could be applied. As the Minister says, there were two schemes: the energy bills discount scheme for commercial and business interests, and the energy price guarantee for domestic customers. The energy price guarantee went straight to customers, because there was a direct relationship between the issuer and the receiver of the discount. However, although a substantial majority of customers were in that position, some domestic customers were not in a position to receive any direct discounts, because, as far as the scheme was concerned, they were not direct consumers of energy. They were people in park homes, people in shared properties in which a landlord had responsibility for the energy supply, or—as in this case—customers of a heat network. It was the intermediary, the heat network operator, that took the discount on the commercial energy bills discount scheme, not the customers themselves.

What happened after that was established as part of the overall discount scheme. I feel that some of the thinking on who got what and through which instrument was not pursued fully when the schemes first came in. Because of the speed at which they came in, the problem of pass-through to customers who would not receive the discount directly was not properly investigated in the first instance.

In an attempt to rectify that, a number of statutory instruments then made provision that, although the heat network operators would get the discount through the EBDS, they were essentially required to pass through the discount to customers. Indeed, because they had to apply for the discount, they were required to register to apply. The discount would not automatically come to them, as was the case in some other aspects of the energy bills discount scheme; they were effectively required to apply and register that they had applied.

[The Chair]

Order. I am following the Opposition spokesman’s comments very carefully. He is making an argument that the two schemes to which he has referred are related. He is entitled to make that argument, but strictly speaking it is not within the scope of the statutory instrument before the Committee. He has made his point clearly, but if he could move on to issues within scope of the statutory instrument, that would be helpful.

[Dr Whitehead]

I completely accept your guidance, Sir George, but I thought it essential for the elucidation of hon. Members to state the position as it actually was, as the discount scheme progressed.

The draft regulations relate specifically to combined heat and power companies required to give a discount to customers. When the Joint Committee on Statutory Instruments considered the original statutory instrument, it was concerned that it imposed an obligation on intermediaries to provide certain information to end users without a mechanism for enforcing it. There was no sanction on those bodies—in this case, energy networks as the intermediaries—to ensure that they would face legal consequences for failing to do so. In other words, if they did not apply to receive a discount or they did not pass it on to their customers, nothing would happen to them.

When I made that point in a debate at the time, the Government said, “We don’t think it necessary to have any kind of sanction in place, because most people will comply, on the basis that we have published a piece of secondary legislation that they will comply with.” However, it is apparent from the draft regulations that in many instances those people have not complied with the requirements. They either did not apply for the discount in the first place or have not passed it on to their customers; we do not know which, because there was never a sanction.

Now, at the end of the scheme, we are saying—perfectly reasonably for administrative purposes—that we should no longer require those people who have not applied to receive a discount to do so in future. As the Minister said, there is a brief period after 31 March when they will be able to do so, but after that it will stop. Effectively, the potentially large number of companies and organisations that have not applied the discount or passed it on will just get away with it. They will just continue with their business and have no liability after that to do anything for their customers. They will probably never know just how many of them have been disadvantaged as a result.

The explanatory memorandum indicates a range of customers and an amount of money of which customers may have been deprived, one way or another. It states:

“Based on data from existing applications, we estimate the value of lost discounts could be up to £1,200 per customer. This lost benefit would disproportionately affect disadvantaged groups—namely the elderly and ethnic minorities—who are significantly more likely to be on a Heat Network.”

There is a essentially a mini-impact assessment in the previous paragraph, which states that between zero and 3,000 quality heat suppliers

“have not applied for the scheme, representing £0-66m of support.”

That is the effect on customers.

The Minister has said that civil sanctions will continue to apply. It may well be that in many instances customers can still take their supplier to court if they think that the supplier has received a discount but it has not been passed through. However, it is very difficult for customers even to know that, and they certainly will not know it after the scheme comes to an end.

According to the impact assessment, there are a large number of customers who should have received a discount of £1,200 but have not, either because the company did not apply for the scheme or because it applied but did not pass anything through. Again, we do not know which is which, because we have no records. There were no sanctions relating to who was doing what with the scheme.

Although the Opposition do not intend to vote against the regulations today, I want to register substantial disquiet about how we have ended up here with the scheme. I know that the Minister is very keen on ensuring that everyone gets their discount. Are there any methods of reaching a more satisfactory ending, other than offering people the option of going to the energy ombudsman or the courts to get their discount? Most people would rather fly to the moon. I would value the Minister’s thoughts.