Draft Contracts for Difference (Miscellaneous Amendments) (No. 3) Regulations 2025
Dan Carden Excerpts(2 weeks, 5 days ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Kerry McCarthy)
I beg to move,
That the Committee has considered the draft Contracts for Difference (Miscellaneous Amendments) (No.3) Regulations 2025.
The regulations were laid before the House on 2 June this year. At the Global Offshore Wind conference this month, the Secretary of State for Energy Security and Net Zero reaffirmed our commitment to strengthening our energy security through the development of home-grown, low carbon power, while delivering a fair price for consumers. That is the best way to bolster our energy security, getting us off the rollercoaster of global fossil fuel markets. It is the best way to spark economic growth across the country, with hundreds of thousands of new jobs, particularly in our industrial heartlands, and it is the best way to tackle the climate crisis for today and future generations. That is why the Government are on a mission to make Britain a clean energy superpower, with clean power by 2030. The regulations will clearly contribute to that mission.
The contracts for difference scheme is the Government’s main mechanism for supporting new low carbon electricity generation projects in Great Britain. CfDs are awarded through annual competitive auctions, with the lowest price bids being successful. The sixth CfD allocation round—AR6, which ran last year—was the largest ever. It awarded contracts to 127 clean energy projects across Great Britain, capturing 7.2 GW of renewable capacity. However, we must ensure the continued success of the CfD. We must continually evolve the scheme to drive progress towards that 2030 clean power target, ensuring that it reflects the global challenges and opportunities faced by the renewables sector while delivering fair prices for consumers.
Building on our commitments in the clean power action plan, we plan to update the scheme, using the regulations, to continue our march towards a low carbon power system. First, the Secretary of State will be allowed to see anonymised bid information submitted to the National Energy System Operator for the allocation round before finalising the budget. In allocation round 6, there was unspent budget for fixed-bottom offshore wind, meaning that an opportunity was lost to potentially secure additional projects at a good price. Without addressing that issue, we risk not being able to take advantage of good value capacity deployment for Clean Power 2030.
Bringing forward renewable capacity at a reasonable cost will benefit consumers by moving the country away from volatile fossil fuel prices. A further amendment involves changing the budget publication process. As I mentioned, ensuring that we avoid budget underspend while continuing to protect consumers is crucial. Changing the budget publication process would allow the Secretary of State to set a budget based on anonymised bid information. That means that the Government can be certain that any capacity procured will advance our Clean Power 2030 ambition and be at a fair price for consumers.
To implement that policy change, we need to amend existing regulations to allow budgets for a CfD round to be published later in the allocation round process. We are also amending regulations to ensure that the costs of the clean industry bonus, referred to as the “sustainable industry reward”, are included in the Ofgem price cap. The first round of the clean industry bonus was run this year, applying to fixed and floating offshore wind, and it was a huge success. We have more than doubled the budget from £200 million to £544 million, leveraging up to £9 billion in investment into UK supply chains depending on AR7 results. That is an unprecedented amount of investment for our offshore wind industry. Never before in an allocation round has so much investment been earmarked for UK factories and ports, all in the poorest parts of our country.
The clean industry bonus sits within the CfD and is funded by the same levy on consumer costs. There needs to be specific provision in the relevant regulations that makes sure that the CIB is to be counted as a specific bill cost, as part of wider CfD costs. That is a technical change; all the rest of the CIB regulations are already in place. It will ensure that the price cap captures all the relevant factors that might affect it. The bill impact for CIBs is low: this year’s CIB round will cost consumers less than £1.50 a year for four years. What we get in return is a historic investment in our offshore wind industry.
To conclude, the consultation on these policy interventions sought views and supporting evidence on specific changes proposed for allocation round 7. We received a range of responses from across the industry, including developers, electricity traders and suppliers, as well as businesses operating in the offshore wind sector and consumer and environmental groups with an interest in the electricity sector.
Most respondents agreed with changing the budget publication process, improving the information available to the Secretary of State when setting budgets, and ensuring that CIB payments are included in the energy price cap. Respondents also provided input on how the Department should implement those policies. The Department continues to engage closely with industry on the development of the CfD.
Dan Carden (Liverpool Walton) (Lab)
The Minister mentioned UK manufacturing. I think it is really important that, as we seek to get towards a clean energy target and with these auctions going forward, the Government do far more to ensure that the production of wind turbines, for instance, is not just done abroad and imported, but involves UK manufacturing, providing decent, well-paid jobs up and down the country.
Kerry McCarthy
I could not agree more, and that is what the clean industry bonus is: it is designed to help foster those jobs through the manufacturing and supply chain. I am going up to my hon. Friend’s part of the world on Wednesday to see all that is happening in the bay when it comes to developing the energy resources of the Mersey. I am very much looking forward to that.
This instrument is another important step towards delivering clean power, shielding families from volatile gas prices and establishing the UK as a clean energy superpower. It builds on the existing success of the CfD scheme, evolving it to better reflect global market realities and to drive progress towards the 2030 clean power target, while protecting consumer bills.
Oral Answers to Questions
Dan Carden Excerpts(1 year, 1 month ago)
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Justin Tomlinson
Our carbon budget delivery plan has over 300 detailed policies. We are recognised as a leader internationally, having already cut emissions by half—the first major economy to do so—with a further ambitious target to get to 68% by 2030, compared with just 55% for the shadow Secretary of State’s beloved EU.
Dan Carden (Liverpool, Walton) (Lab)
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)
The energy suppliers are responsible for paying compensation. They have carried out 150,000 assessments so far, with 2,500 customers due compensation. A total of 1,502 payments have been made, with 1,000 more planned.
Dan Carden
Despite the energy ombudsman ruling that one of my constituents should not have been placed on a prepayment meter due to her vulnerabilities, she has not been awarded a penny of compensation under the scheme. As the Minister has just outlined, only 1,500 people, out of 150,000, have had any compensation awarded at all. That is 1%, so why is the number so small? Could it be that the energy suppliers themselves, overseen by Ofgem, are deciding who is entitled to these payments? Both sat idly by as agents forced their way into people’s homes to install the prepayment meters.
Amanda Solloway
I thank the hon. Gentleman for his question and for the opportunity to provide clarity. The forced installation of prepayment meters is clearly unacceptable, and the Government have done everything we can to counteract it. However, I reiterate that 150,000 investigations were carried out, in 2,500 of those cases compensation is due and, instead of 1%, the actual figure on compensation is 60%.
Andrew Bowie
As my hon. Friend has heard me say already today, solar power is important, and we remain committed to our 70 GW target. However, food security is as important as energy security when it comes to national security. That is why we are protecting the best and most versatile farmland in the United Kingdom. Unlike the Opposition, we respect the views of communities up and down the country; we will ensure that our countryside is not industrialised, and incentivise companies, individuals and organisations to invest in rooftop solar, and solar on brownfield, not greenfield, sites.
Dan Carden (Liverpool, Walton) (Lab)
Amanda Solloway
We are ensuring that energy businesses are able to survive, and not just through the price caps. This is also a matter for Ofgem.
Energy Bills Discount Scheme Regulations 2023
Energy Bills Discount Scheme (Northern Ireland) Regulations 2023
Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023
Energy Bills Discount Scheme Pass-Through Requirement Regulations 2023
Energy Bills Discount Scheme Pass-Through Requirement (Heat Suppliers] Regulations 2023
Dan Carden Excerpts(2 years, 1 month ago)
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Amanda Solloway
It is a great pleasure to serve under your Chairmanship, Mrs Latham. The regulations were laid before the House on 25 April 2023, and I will refer to them collectively as the EBDS regulations.
The Government responded decisively to the unprecedented rise in energy prices caused by Putin’s brutal invasion of Ukraine by delivering critical bill support to households, businesses and other non-domestic energy consumers. More than £7 billion of support has been delivered by the energy bill relief scheme alone. That equates to approximately £35 million a day, and it has helped many businesses to keep the lights on.
The Government’s emergency legislation paved the way for the support package to be delivered rapidly across the entire United Kingdom. The Energy Prices Act 2022 was introduced in Parliament on 12 October 2022 and provided the legislative footing needed to ensure that the Government could deliver much-needed support to UK businesses through the energy bills discount scheme.
These regulations are needed to implement and operationalise the energy bills discount scheme. That follows the energy bill relief scheme, which ended on 31 March, and it ensures continuity of support to cover energy consumed between 1 April 2023 and 31 March 2024. Although wholesale energy prices have fallen since their peak, many consumers may still be exposed to higher bills and be in need of support, and the scheme takes that into account. The purpose of the regulations is to reduce the charges for electricity and gas supplied by licensed and licence-exempt energy suppliers to eligible non-domestic customers, and to make payments to suppliers in respect of those reductions in Great Britain and Northern Ireland.
Each statutory instrument is a replacement for an earlier set of regulations that implemented the original EBRS. They ensure that any end user receiving energy that is supplied with the benefit of these schemes through an intermediary will get a “just and reasonable” share of that benefit. Without such intervention, non-domestic customers would no longer be provided with support. Instead, they would be exposed to the full impact of high wholesale market prices. In order to protect all eligible customers from excessively high energy bills, the EBDS will run for a 12-month period from 1 April 2023 to 31 March 2024.
I will now turn to the detail, starting with the Energy Bills Discount Scheme Regulations 2023.
Dan Carden (Liverpool, Walton) (Lab)
I want to raise an issue that has come up a number of times in my constituency. Residents in social housing are having to pay more for the electricity and gas that fuels things in communal areas, such as lighting. That is because housing associations have to buy that at a commercial rate. They then pass the cost on to residents, and sometimes it is four or five times higher than the rates that residents pay for their personal energy consumption. Is there anything in the regulations to address that? If there is not, will the Minister write to me to say whether the Government are going to do anything about the extortionate rises for residents in social homes in my constituency?
Amanda Solloway
I thank the hon. Member for that good point. I will come on to exactly what this Bill is hoping to address, but I encourage him to write to me. I am also happy to have a face-to-face meeting.
I turn to the detail. The regulations set out that, with a few exceptions, all domestic customers with electricity and gas contracts from both licensed and licence-exempt non-domestic energy suppliers will be eligible for a discount when the wholesale element of their contract is above a certain level. Licence-exempt supply includes energy taken from the public electricity or gas grid, or received via wire or pipe from a licence-exempt provider, where the customer is charged prices pegged to wholesale prices.
The Energy Bills Discount Scheme regulations for Great Britain and the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 provide for three elements of the scheme for end users of licensed suppliers, and the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 replicate them for end users of licence-exempt suppliers.
The first element is a baseline per-unit discount applicable to all non-domestic customer energy bills throughout the scheme’s duration. That discount will be applied if wholesale prices are above a certain price threshold.
The second element is that a higher rate of relief will be provided to non-domestic customers that carry out a substantial part of their UK activities in certain energy and trade-intensive sectors, following a review of the operation of the previous energy bill relief scheme. Those industries have been identified as being less able to pass through their increased energy costs to customers because of international competition. As with the baseline element of the scheme, the discount is applied if wholesale prices are above a certain level.
Oral Answers to Questions
Dan Carden Excerpts(2 years, 3 months ago)
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Grant Shapps
My hon. Friend is absolutely right. That is why we put £200 million into funding new hydrogen in the “Powering up Britain” document just a few weeks ago. He will know about Great British Nuclear. I intend that we launch a competition, pick a winner for that by the autumn and get on with it.
Dan Carden (Liverpool, Walton) (Lab)
If the energy price guarantee is to come to an end in June, surely the logical next step is a social tariff. People have become used to social tariffs from their mobile phone providers and broadband. What is the Secretary of State doing to make sure energy companies introduce a social tariff to target support at the most vulnerable in society?
Grant Shapps
Just to correct the record, it comes to an end in April 2024, so that guarantee remains in place. Wholesale prices in the meantime, fortunately, have been falling—I noticed that they are £98 per therm this morning. We do think that things like a social tariff could be very helpful and the Chancellor has undertaken to look at that as well.
Oral Answers to Questions
Dan Carden Excerpts(2 years, 4 months ago)
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Graham Stuart
We were firm proponents of modernising the treaty precisely so that it would not do what the hon. Lady described, but, as I have said already, we will continue to watch the situation closely.
Dan Carden (Liverpool, Walton) (Lab)
Ruth Jones (Newport West) (Lab)
The Secretary of State for Energy Security and Net Zero (Grant Shapps)
I wrote to suppliers in January calling on them to halt the inappropriate use of prepayment meters and to provide transparency on the use of warrants in people’s homes. Along with a number of other steps, that has led to the cessation of that practice.
Dan Carden
The Secretary of State will know that I wrote to all energy companies before the practice was suspended. The mixed bag of responses showed that a voluntary approach simply will not work. Utilita chief executive officer Bill Bullen said:
“We will not commit to ending the forcible use of prepay. That course of action is simply not sustainable.”
There is a suspension until 31 March, and compensation has been talked about. However, all that is about is Ofgem asking companies to look at whether the forced instalment was appropriate. Companies know that Ofgem is toothless. It is down to the Secretary of State to ban this practice and to set out how compensation will be given out.
Grant Shapps
I welcome the hon. Gentleman’s moves in this sphere. To be clear to the House, I wrote to the suppliers and received reassurances that they would end the practice. I asked Ofgem—I have to say that I thought the wool had been pulled over its eyes—to not just take energy companies’ word for it but go to the customers, which it is doing. I queried the fact that the courts were issuing mass warrants, which they have agreed to end. He talks about what happens next; he is right that Ofgem is looking at what further protections will be in place. Its work will conclude shortly with further announcements.
The Minister of State, Department for Energy Security and Net Zero (Graham Stuart)
I am sure my hon. Friend is as delighted as I am that the United States and the EU are now following our lead in developing renewables, including offshore wind. We work closely with the Chancellor to ensure that the UK remains, as it has been consistently under this Government, the best place in the world in which to invest in offshore wind.
Dan Carden (Liverpool, Walton) (Lab)
Graham Stuart
Seventy-seven per cent. of our energy today comes from fossil fuels. We will be using about a quarter of the gas we do today in 2050 under net zero. The idea that importing that, with higher emissions attached to it, rather than producing our own, is ridiculous environmentally, ridiculous economically and ridiculous in terms of maintaining the skills in the North sea that we are going to need for the transition, with hydrogen, carbon capture and other industries coming forward. I ask the Labour party to change its mind.