draft Electricity Supplier Obligations (amendment and excluded electricity) (amendment) regulations 2017

Gill Furniss Excerpts

Monday 16th October 2017 General Committees

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

The regulations are essentially a series of sensible clarifications and adjustments to the working of the scheme to exempt energy-intensive industries from paying money towards the cost of supporting energy schemes, such as contracts for difference given to low-carbon projects such as offshore wind. We support the idea that energy-intensive industries should not have that requirement placed on them in addition to the cost of the substantial amount of energy they use, so we will not divide the Committee on the regulations.

However, I would like the Minister to address and clarify questions arising from the new regulations. The first is on the consequence of exemptions on the bills of non-exempt industry and, particularly, on the bills of domestic energy customers. The regulations and their amendments will have a consequence for domestic bills, as obligations to pay for the cost of renewable underwriting are socialised across those paying bills. The exemption of part of that constituency of bill payers will result in marginal increases in obligation payments for everyone else.

It is suggested in the explanatory memorandum that domestic users should anticipate an increase in their bills of around £1 a year. However, in the impact assessment published alongside the original 2015 regulations, it is suggested that the effect of the regulations will be to add about £1.80 to a domestic bill. Will the Minister clarify whether the difference between those figures represents a lowering of the cost of the exemption as a result of the amendments, a change in the method of calculating domestic bill costs or simply a mistake in translating the costs between the two explanatory notes?

The second question relates to a passage in the explanatory memorandum that sets out the difference in the intention and outcome of the regulations. Paragraph 8.8 describes the Government’s intention

“to remove the provisions in the 2015 Regulations that allow direct competitors of eligible EIIs which are not in themselves eligible”

for relief under the regulations to also “claim the CFD exemption.” The memorandum indicates that the proposal was not approved by the EU for state aid, so it is being discontinued. The Minister mentioned that earlier, but we would welcome a more focused clarification, as it appears to have resulted in some over-exemption of liability to pay for green energy costs and thus to possible recovery of that over-exemption from companies that were initially exempted but no longer are.

I note that a mechanism for recovering and redistributing over-exemptions in certain energy-intensive industries is not included in the regulations because it seems that a workable model for doing so has not yet been identified. Will the Minister tell the Committee what the extent of those over-exemptions is, and when she is likely to identify a mechanism for recovering and redistributing those sums? That could be important for the overall effects on domestic bills.