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

Kevan Jones Excerpts

Monday 16th October 2017 General Committees

[Mr Kevan Jones (North Durham) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gapes. To follow up on the clarification requested by my hon. Friend the Member for Sheffield, Brightside and Hillsborough, I am always concerned when Ministers say that it is about £1, and it will affect domestic bills for the next few years. Should I assume that the explanatory memorandum is wrong in referring to £1.80 as the additional figure? It rightly points out that the cost of the increase will fall disproportionately on low-income households because they spend more of their disposable income on electricity than others. I would like the Minister to clarify what the actual figure is, because just to throw the line out, as the Minister did, that it will be about £1—which could mean 99p, 90p, or £1.80 as the explanatory memorandum says—is not clear.

The Minister said “for the next few years”, but the explanatory memorandum says that this will take up to 2020. If that is the case, what work is being done on what will happen after our exit from the EU? Will we have to re-examine the regulations, or is it the Government’s intention to continue rolling them forward? Do the Government have a policy in mind to take a more aggressive stance on subsidies to make them more competitive vis-à-vis our European competitors? What thought has gone into that?

Over the period up to 2020, what will be the cost to UK household bills? We are talking about the mythical £1 to which the Minister referred, but we ought to try to get a global figure of what it will actually cost UK households in that period.

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[Margot James]

I thank Committee members for their questions. I am very pleased that they agree with the direction of this important statutory instrument. In answer to the questions from several hon. Members, led by the shadow Minister, concerning the discrepancy in the notes on the increased cost of household bills due to this measure, the difference in estimates of an additional £1 and £1.80 to people’s bills is because the population of eligible energy intensive industries is less than we originally estimated. As a result, the burden on consumers has reduced from approximately £1.80 to £1 a year. In answer to another question from the shadow Minister, there have been no over-exemptions as yet, as the regulations have not yet been enacted. We have general powers to claw back any over-exemptions if needed, but we are looking at whether a specific mechanism would be helpful.

[Mr Jones]

There is a huge drop from £1.80 to £1. I understand what the Minister is suggesting, but what is the percentage drop for the industries that will be eligible? If it is of that order—nearly 100%—it must be quite big. Are the estimates wrong about the number of industries that would be eligible or, as the policy has developed, have certain industries been taken out of the process?

[Margot James]

The estimate was too high in the first place and it has reduced. I will look into the reasons for that and I will write to the hon. Gentleman. In his speech, he asked about the policy for this sector of the economy post-Brexit—might we pursue a more competitive approach vis-à-vis the rest of the European Union? I think that he is asking what our policy on state aid will be after we leave the European Union, and that is a matter for the negotiations.

I think I have addressed the questions raised by Committee members. The hon. Member for Bethnal Green and Bow said that the average increased cost of electricity for a medium business user would be £3,100 a year—she is correct on that point.

[Margot James]

For this measure to be cost neutral, the cost of exempting some energy intensive users has to be distributed fairly among businesses. For an average user—a medium-sized user—the uplift will be about £3,100. As yet, the Government do not have plans to mitigate that.

[Mr Jones]

What assessment have the Government made of what types of businesses will be affected? I see the logic of the draft regulations in helping energy intensive industries, many of which consist of large entities that I accept are in international markets, but £3,000 a year is a huge amount for a small or medium-sized business. Has any assessment been made of which businesses the burden will fall on?

[Margot James]

I said “a medium-sized user” of electricity; I did not mention small businesses. I agree that that would be a significant increase for a small business. We are developing a package of measures to support businesses to improve their energy use and productivity and to make them more energy efficient. That is how their bills will be reduced in the long term.

The average increase represents less than 0.5% of the total electricity bill of a medium-sized business. I feel that that is an appropriate price to pay for the benefit that energy intensive users will gain. The shadow Minister indicated the Opposition’s support for this measure. As she said, if we do not do this, high users of energy might be driven out of the UK, which would result in carbon leakage. That would not be a satisfactory outcome, so we have amortised the costs elsewhere. I think that 0.2% is a sustainable increase for the average medium-sized business user of electricity.

[Mr Jones]

I accept that, but I have to say that the Minister is flying blind here. Have the Government made any assessment of the businesses that will be affected? Do not get me wrong. I support the main thrust of the draft regulations, which aim to protect substantial users of electricity, but if the Government do not properly assess their effects we might protect one side of the economy but lose jobs elsewhere.

[Margot James]

Eligible energy intensive industries can also be small and medium-sized businesses. Very few of the vast array of companies across the country are exempt. The cost of the exemption will be amortised across many million businesses, so the average increase will be small, and the average company can bear that. I will write to the hon. Gentleman with any further information that we have that demonstrates the assessment that we have made of those companies.

I mentioned that we have developed a package of measures to support businesses to improve their energy efficiency. That aims to improve energy usage by at least 20% by 2030. We have also launched an independent review of the cost of energy, which I am sure the shadow Minister is familiar with. That review is led by Professor Dieter Helm and is all about helping companies to reduce their energy usage, which will be good for the environment and for company costs.