DRAFT ELECTRICITY AND GAS ETC. (AMENDMENT) (EU EXIT) REGULATIONS 2020 DRAFT ELECTRICITY AND GAS (INTERNAL MARKETS AND NETWORK CODES) (AMENDMENT ETC.) (EU EXIT) REGULATIONS 2020

Kwasi Kwarteng Excerpts

Monday 7th September 2020 General Committees

[The Chair]

Everybody is socially distanced. If anybody has notes, can they please email them to Hansard rather than hand them to Hansard? I call the Minister to move the first motion and to speak to both instruments. At the end of the debate, I will put the question on the first motion and then ask the Minister to move the second motion formally.

[The Minister for Business, Energy and Clean Growth (Kwasi Kwarteng)]

I beg to move,

That the Committee has considered the draft Electricity and Gas etc. (Amendment) (EU Exit) Regulations 2020.

[The Chair]

With this it will be convenient to consider the draft Electricity and Gas (Internal Markets and Network Codes) (Amendment etc.) (EU Exit) Regulations 2020.

[Kwasi Kwarteng]

It is a pleasure to open this short debate—I hope it will be short, anyway—under your chairmanship, Ms Elliott. The regulations were laid before the House on 22 June and 6 July respectively. When the transition period ends, as members of the Committee know, direct EU legislation and EU-derived domestic legislation that form part of the legal framework governing our energy markets will be incorporated into domestic law by the European Union (Withdrawal) Act 2018. These two SIs form part of my Department’s work to ensure that the UK’s energy legislation continues to function smoothly after the end of the transition period at the end of this year. The SIs ensure that the energy markets will be smoothly managed in the event that the UK does not reach an agreement or should the agreement that we do reach not cover the relevant policy area.

The first SI relates to what was done in the Department for Business, Energy and Industrial Strategy before the withdrawal agreement was agreed. Prior to the UK’s departure from the EU, BEIS laid several SIs that prepared for the eventuality that we would not achieve a withdrawal agreement. Members will have noticed that, since the SIs were made, the UK has left the EU on the terms of the withdrawal agreement, so those now have to be amended to take account of the fact that we have a withdrawal agreement.

The first SI makes consequential changes to reflect new legislation that has come into force since the original SIs were made. An example of where the first SI amends the original SIs is that we can now refer to electricity regulation, and that is now made consequential on the gas directive, which has also been changed as a consequence of the past two years. The SI also amends the original SIs with respect to the Northern Ireland protocol, which was attached, as we all remember, to the withdrawal agreement. The original SIs governing this space were made in 2019 before the withdrawal agreement was signed and agreed, and therefore the amendments in this SI fix the deficiencies that resulted from the fact that the original SIs were made on a UK-wide basis. Under the Northern Ireland protocol, however, EU legislation that applies in respect of the wholesale energy market will continue to apply in Northern Ireland after the transition period, and therefore the first SI removes provisions that were originally made relating to Northern Ireland that are no longer relevant because we have a withdrawal agreement and also the Northern Ireland protocol.

Finally, the SIs will now take effect from the implementation period completion day rather than exit day. Consequently, this SI updates the references that were previously made in the old SI. It essentially takes into account the fact that we have a withdrawal agreement and amends the SIs that were laid before the withdrawal agreement was signed up to.

The second SI relates to the period after the end of the transition period and reflects the fact that, since we laid the previous SIs in 2019, new EU legislation has come into effect. It makes amendments and revocations to the following new pieces of EU legislation: the electricity regulation and three of the electricity network codes. That new EU legislation will become retained EU law at the end of the transition period through the withdrawal agreement. Deficiencies in the legislation therefore need to be fixed so that we can make the regime workable after the end of the transition period. The SI also revokes the agency regulation, as it includes obligations that would be inappropriate and would not make sense after the end of the transition period, because Great Britain will no longer be a member of the Agency for the Cooperation of Energy Regulators.

By amending existing rules to ensure that they operate effectively in domestic law and amending provisions that will no longer be relevant after the transition period, the two SIs will maintain the operability and integrity of the UK energy market and UK energy legislation. They will provide maximum certainty for businesses and continuity for market participants.

In conclusion, the regulations are an entirely appropriate use of the powers of the withdrawal Act, which are designed to support a well-functioning, competitive and resilient energy system for consumers. They also provide clarity about the role and functions of UK bodies and market participants after the transition period ends on 31 December. As a consequence, I commend them to the Committee.

--- Later in debate ---

[Kwasi Kwarteng]

I am very pleased to respond to the hon. Gentleman, whose diligence in these matters is always to be commended, but I feel that there is a slight misapprehension about the force of the two SIs. As I described in my opening remarks, the whole point of the first SI is that it amends SIs that were laid before the withdrawal agreement was signed. Those SIs reflected, or tried to describe, the arrangements in Northern Ireland. The hon. Gentleman will know, as will other Members of the Committee, that at least a third of the withdrawal agreement related to the Northern Ireland protocol. I know that, because I was the Minister on the relevant Bill, but I failed to get the Bill through, as you, Ms Elliott, will remember. As the withdrawal agreement has come through, the SIs that we laid before its agreement are essentially redundant.

The first SI that we are debating essentially amends those SIs in the light of the fact that we have a withdrawal agreement and that the agreement has a Northern Ireland protocol attached to it, which determines many of these issues in relation to Northern Ireland. The hon. Gentleman is quite right to say that the second SI does not deal directly with the Northern Ireland issue. However, what has happened since then is that we have got a Northern Ireland Government. We all know—this was an issue that we have talked about at length, and I think that he and I debated it—that the single electricity market, or SEM, is what largely determines these issues on the island of Ireland. The workings of the SEM have been the subject of other SIs, as both he and I know well.

To answer the hon. Gentleman’s first question, it is not true to say that if we do not legislate in this way and there is not an agreement, the status quo just carries on. It does not just carry on, because, as I have said, the SIs have been superseded by the withdrawal agreement. In a way, this measure is a sort of safety blanket. We fully expect that there will be a deal, and that when there is a deal, we will have to reflect the institutions and how the energy market works according to that future deal, whenever it arrives and whatever its details are, when they are fleshed out. This measure is essentially just a safety blanket. It is not true to say that if we do nothing, we can simply carry on as before.

[Dr Whitehead]

I accept, of course, that it would not just be a case of status quo. Nevertheless, there is a question, in my mind at least: within a wider and overall deal, what would a specific deal on energy markets and energy transmission consist of? Does the Minister have information on that, with which he can reassure us this afternoon?

[Kwasi Kwarteng]

It would be quite an extraordinary ask, given that the negotiations are ongoing, for me to be able to tell the hon. Gentleman exactly what the details of those negotiations are. He will understand—this is public knowledge—that we hope to be part of or have a stand-alone emissions trading scheme, which is related to the EU’s ETS. However, as I have said, that is exactly the meat of the negotiations that are taking place, and it would be extraordinary for me in this public forum to say what the outcome of those negotiations will be.

If I may, and without further ado, I will say a couple of words in conclusion. The Government are committed to achieving a smooth end to the transition period so that our energy system operates with continuity and certainty. We confidently believe that these regulations will help to accomplish that in the event—the regrettable event—of there being no further agreement. We think that there will be an agreement, but should there not be one, these SIs will be very useful, because they will ensure continuity for our energy system, they will remove outdated references to legislation that no longer exists and that is not relevant, given the passing of the withdrawal agreement, and, as a consequence, they will provide more certainty for market participants. On that basis, I am pleased to commend them to the Committee.

Question put and agreed to.

DRAFT ELECTRICITY AND GAS (INTERNAL MARKETS AND NETWORK CODES) (AMENDMENT ETC.) (EU EXIT) REGULATIONS 2020

Resolved,

That the Committee has considered the draft Electricity and Gas (Internal Markets and Network Codes) (Amendment etc.) (EU Exit) Regulations 2020.—(Kwasi Kwarteng.)