Energy Prices Bill

Baroness Young of Old Scone Excerpts

2nd reading
Wednesday 19th October 2022 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I put on record that I am not sure I support Martin Lewis for Prime Minister, but anything is possible.

I am sure we all support the need for the Government to act urgently to protect households from the rising costs of energy and to reduce the impact of price rises on the inflation figure. I will not comment on the pig’s ear that the mini-Budget and the subsequent fiscal event have been, other than to express a real, deep sadness at the damage done to our economic credibility and international reputation.

I will focus on three issues in the Bill. I agree with much that the noble Baroness, Lady Worthington, said on two of these issues. The first issue is concern about the nature of the powers the Bill gives to Ministers; the second is concern about the Bill’s impact on energy regulation, the energy market and investment; and the third issue, on the protection offered to off-grid households, has not been raised so far in the debate.

I start with the nature of the powers the Bill gives to Ministers. It must be a pretty rare event to be briefed on the same issues, with the same view, by the Delegated Powers and Regulatory Reform Committee and the energy producers, both fossil fuel and renewable, across Britain. I had not experienced that rather unusual combination of events before.

Although it is completely right that the Government have had to move at pace to design and deliver interventions to protect energy bill payers from even greater price shocks than they are already experiencing, we must not let haste create collateral damage through unintended consequences. The Delegated Powers and Regulatory Reform Committee’s report today is heavily critical—that is probably a mild way of presenting it —of the Bill. It regards the legislative sub-delegation it permits as totally inappropriate. In a previous report it branded such delegation as

“a more egregious erosion of democratic accountability than a simple delegation to a minister to make secondary legislation.”

There is no doubt what the committee thinks about it.

The committee is also critical of Clause 22 and the power to give direction as a Henry VIII power, allowing ministerial direction to modify legislation, including primary legislation. Such direction and modification of legislation would of course not be subject to parliamentary scrutiny. Apart from stressing the need for speed, the Government have so far been unable to explain why the required changes could not be achieved through secondary legislation, subject to parliamentary scrutiny and with the affirmative procedure applying, at least where it is used to modify primary legislation. Perhaps the Minister could respond on that. The Delegated Powers Committee has also asked for a time limit to be placed on the powers of direction, because currently there is none.

Some concerns within the whole range of energy producers fall in line with those of the Delegated Powers Committee. Their fears are that the breadth of powers being awarded to the Secretary of State would enable them to make greater changes to the energy production sectoral rules, without consultation or appeal. The powers being given have no time limit and the definition of an energy crisis, within which the powers are supposed to operate, is so broad that they could reasonably considered to be extensive and permanent.

I am sure the Minister will say that there is a need for speed, and that anything other than nodding through the Bill risks delaying help to the vulnerable people who are most impacted by rising energy prices. However, can he tell the House whether we will hear, before next week’s stages of the Bill, how the Government intend to respond to the two criticisms by the Delegated Powers Committee regarding sub-delegation and direction, which are also relevant to the concerns raised by the generators, both traditional and renewable?

Unlike the noble Lord, Lord Foster of Bath, and despite the Long Title, I do not want to see the remit of the Bill expanded. I would like it to be tightened. The Bill is necessarily having to progress at such a pace that, in the absence of time for proper consultation, it ought to be restricted to the bare minimum of interventions necessary to protect the public for the minimum period of six months, until the next review of the protection measures is due to be put in place, as announced by the Chancellor. Will the Minister agree to review the extent of the Bill and the time limitation of the legislation before we consider its further stages?

The Bill also contains provisions that are unnecessary to achieve the immediate protection of consumers from rising energy prices. For example, the Bill seeks to amend the tariff cap Act, including by removing the sunset clause for the price cap. Can the Minister tell the House why the amendment to the tariff cap Act is necessary for measures which are to be reviewed in three months, and changed in six months?

A further concern on the part of the renewables generators is the cost plus revenue limit, already referred to by the noble Baroness, Lady Worthington. If we have hasty implementation of this limit, focusing on revenue rather than profits, and link that with the Chancellor’s statement that a further extension of the windfall tax is “still on the table”, it absolutely risks shaking the confidence of investors in renewable energy. The Minister did not really respond to the intervention of my noble friend Lord Liddle in respect of the impact on investors. Will he tell the House, when he responds, what assessment has been made of the likely impact on investor confidence as a result of the method of calculating and implementing the CPRL?

My final issue is with the equivalent measures proposed by the Government for people who are off grid—the 1.1 million homes using oil, liquefied petroleum gas and other forms of fuel. I should declare an interest as an off-grid rural home owner, unable to connect to the gas grid. Mine is an older building where there is limited potential for effective energy conservation upgrading, along with a listed building officer who appears not to like heat pumps.

There are 1.1 million homes which are off grid, and they are all in varying circumstances. Many of these off-grid homes are in rural areas and many of the poorest people in rural areas live in them. They are often older buildings with limited potential for energy conservation upgrades, and no cap is proposed for heating oil. The cost of heating oil has gone from 27p per litre in April 2020 to over £1 per litre in April 2022, although it has marginally dropped since then. That is a fourfold increase. The Government have only belatedly offered £100 per annum to oil users to help meet this cost.

The Minister will no doubt say that those off the grid will also benefit from the £400 energy bills support scheme and the £1,200 represented by the cost of living benefits targeted at low-income households. However, the reality is that electricity customers will have over £1,000 of protection through the price cap while oil users and other off-grid homes will get a measly £100. To make matters worse, there is no clarity on when this measly £100 will be paid. People have been buying their winter fuel oil in advance to make sure they have stocks for winter. They have been paying excruciating prices for months, yet all that is on the table is a very small amount, very late in the day, with no clarity as to when.

There are a small number of off-grid users who are not connected to the electricity supply either. How they are going to be reimbursed, as they do not have an electricity contract, is also a question. Can the Minister tell us how the £100 was calculated? How can he assure us that it is fair proportionately for those 1.1 million homes compared with what is being done for those who are on the gas supply? Can he tell us when it will be paid?

Can I also put the Minister on notice? I have recently done that in person. Outside this Bill I was intending to harass him on the further difficulties that off-grid homes are likely to experience as a result of the proposed reforms to the off-grid regulations. These would stop fossil fuel boilers being replaced in off-grid homes from 2026. I hope the Minister is going to be able to assure me at the end of this debate that he is not proceeding with haste towards that while the heat pump market is still in its infancy and not terrifically affordable, efficient or available. I hope he can give me assurances about the off-grid regulations, but I believe that we should tread very carefully in that respect.

If not, should your off-grid oil boiler irretrievably break down the day before Christmas, you could be propelled instantly into a complex, slow, confusing and expensive process of finding a heat pump supplier and installer—they are in pretty short supply—upgrading your insulation and radiators, and funding the upfront costs of the pump and the accompanying energy efficiency upgrades. All of this would be while burning your furniture in the background to keep your granny from freezing to death over the months this would take.

I thank the Minister for our recent conversation about this. Perhaps he can provide clarity to off-grid households on the Government’s response to the off-grid regulations, including when a formal announcement will happen. In the meantime, will he assure the House that this emergency Bill will be stripped down to the minimum measures, both in extent and time, to deliver the basic energy price guarantee to avoid as many unnecessary and inadvertent consequences as possible?

--- Later in debate ---

[Lord Callanan (Con)]

I have referred to the pipeline of solar for which planning permission has already been granted or that is in scope. I think the noble Lord can see that there is a considerable pipeline of solar plants that are already coming on stream and that our target remains in place.

[Baroness Young of Old Scone (Lab)]

Would the Minister give way on that point? I hope we can depend on him to make the point to the Secretary of State for the Environment that, if he had a proper land use strategy, he would not have a conflict between wind farms, solar farms and agricultural land. We would have a proper planned process to use our land wisely.

[Lord Callanan (Con)]

I thank the noble Baroness for that point. It is now on the record, and I will ensure that it is drawn to the attention of the Secretary of State for the Environment. In answer to the point made by the noble Baroness, Lady Worthington, about our negotiations with Norway, following the successful vaccine task force, we have created a new energy supply task force under the leadership of the excellent lady Maddie McTernan. She had such success with vaccines that we have now given her an even tougher challenge to solve. She and her team are already negotiating new long-term energy contracts with domestic and international gas suppliers to bring down the cost of the intervention immediately. The Government are opening negotiations with domestic and international gas suppliers on the prospects of longer term, lower cost gas contracts.

The right reverend Prelate the Bishop of Manchester was wrong to question whether the Bill should include suspension of green levies. In fact, we have not suspended the green levies in Great Britain; £150 of the savings will be delivered by temporarily suspending environmental and social costs being passed on to consumers. They were levied on bills, but they will now be directly funded by the Exchequer under the energy price guarantee. The Whip is telling me that I am running out of time, so apologies if I do not manage to get all the remaining points in. Those costs will be transferred to the Exchequer, so they are not borne by consumers, but they are present and still funded to help us benefit from low-carbon electricity generation.

The noble Baroness, Lady Bennett, asked about community-owned energy schemes, and we recognise the role community and locally owned renewable energy schemes can and do play in supporting the UK’s national net zero targets. These projects help encourage innovation and investment as well as community engagement with the energy challenge.

The noble Baroness, Lady Young, asked about the £100 alternative fuel payment, as did the noble Lord, Lord Rogan. This is designed by reference to past increases in the cost of heating oil in the year to October 2022. We will be monitoring the price of heating oil and other alternative fuels closely in the months ahead to see whether further payments are required at a future point in time. The noble Baroness also asked about the off-grid gas consultation. As I said to her in our conversation, we consulted last year on plans to phase out the use of fossil fuel heating on the gas grid. We have not made any decisions yet on how to move forward. The noble Baroness will be the first to know when those decisions are made and announced.

If the House will permit me just a little bit of time to say something on the important subject of Northern Ireland, I would like to touch on our equivalent support for Northern Ireland, in response to the noble Lord, Lord Rogan. In the absence of an Executive, the UK Government are taking steps to ensure that households and businesses across the whole of the UK are able to access support to manage their energy bills. In doing so we are ensuring that households and non-domestic consumers in Northern Ireland receive an equivalent level of support to those in Great Britain. I am sure that will reassure the noble Lord.

To conclude, I am encouraged by the support for the Bill, and I thank, in particular, noble Lords in the Opposition for that. I realise, of course, that on all the various subjects noble Lords have many other points that they wish to make and to put forward, but I think there is general support across the House for the Bill. As always, I look forward to continuing constructive engagement as the Bill progresses through your Lordships’ House.