Energy Bill Relief Scheme Regulations 2022

Lord Callanan Excerpts

Wednesday 16th November 2022 Grand Committee

Moved by

[Lord Callanan]

That the Grand Committee do consider the Energy Bill Relief Scheme Regulations 2022.

Relevant document: 17th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, these regulations were laid before the House on 31 October. The EBRS GB and EBRS NI schemes are necessary in response to exceptional global circumstances affecting energy prices. Putin’s illegal war in Ukraine has led to an unprecedented rise in energy prices, affecting businesses and vital services right across the UK. The Government have moved swiftly to introduce emergency legislation to protect consumers from these inflated prices, which will stop businesses collapsing, protect jobs and limit inflation. I am grateful to the opposition parties for helping us speed the legislation through the House. The wider negative effects of this economic pressure, including on the businesses of gas and electricity suppliers themselves, would be severe and would materialise very quickly in the absence of an intervention of this kind.

The Energy Bill Relief Scheme Regulations 2022 and Energy Bill Relief Scheme (Northern Ireland) Regulations 2022—the EBRS regulations—have been created under the Energy Prices Act, which, as the House knows, gained Royal Assent on 25 October 2022. The Energy Prices Act, introduced in Parliament on 12 October, provided the legislative footing needed to ensure that businesses across the UK receive support with their energy bills this winter through this EBRS. The regulations are essential secondary legislation, needed to implement and operationalise the ERBSs.

The regulations reduce the charges for electricity and gas supplied by licensed energy suppliers to eligible non-domestic customers and make payments to suppliers in respect of those reductions in Great Britain and Northern Ireland. The schemes represent significant and bold action by the Government to protect all eligible non-domestic customers—including businesses, charities and the public sector—such as hospitals and schools, from excessively high energy bills over the winter period. As a result, the scheme will run for a six-month period from 1 October 2022 to 31 March 2023.

Turning to the detail of the regulations, the EBRS GB and EBRS NI regulations set out that, with few exceptions, all non-domestic customers with electricity and gas contracts from licensed non-domestic energy suppliers will be eligible for a discount. The discount will be applied to the wholesale price element of bills, and the regulations set out how this discount has been calculated. The regulations cover the process by which the energy supplier is reimbursed by the Secretary of State for the discount. Regulations give powers to the Secretary of State to delegate this function where he considers it appropriate. Further provision is included to prevent suppliers or customers deriving greater benefit than is intended, in order to protect the integrity of the schemes.

The regulations also provide for an additional reduction to be applied for qualifying financially disadvantaged customers who are supplied under so-called “deemed” or “out-of-contract” contracts. The EBRS NI regulations prevent end-users who are outside Northern Ireland receiving the discount to their bills. The regulations also cover essential operational matters, including information and reporting obligations, enforcement powers and powers to impose civil penalties in respect of missing or defective declarations.

To accompany the regulations, we have published a suite of legally binding rules and non-statutory guidance, which provides further detail on how the schemes work in practice. Given the urgency of ensuring that organisations receive the support they need this winter, we have not been able to launch a formal consultation. Instead, we have had extensive informal consultations with energy suppliers, regulatory bodies and delivery bodies. We commit to reviewing these instruments as necessary following their implementation, based on stakeholder feedback. Additionally, separate pass-through requirement regulations were laid in Parliament to ensure that intermediaries such as landlords, who have received energy price support, pass through the benefit obtained to end-users—for example, non-domestic customers in rented properties. This also includes the laying of separate regulations to ensure the pass-through of EBRS benefits to heat network customers.

The regulations’ objectives are to support economic growth and to limit inflation, and we expect their most significant impact to be the avoidance of the closure of many firms, and therefore of redundancies. The benefits of avoiding closures will accrue to business, while the benefits of avoiding redundancies will of course provide broader benefits to society. Our aim is that the support delivered through these schemes will enable public services such as schools and hospitals to continue to operate this winter.

The EBRSs remain a source of critical support for non-domestic customers across the United Kingdom. Let me emphasise that the measures in these regulations are crucial for the effective operation of the schemes. The schemes will complement the other large-scale support the Government are providing with energy and the cost of living. I hope the House will be able to support these measures and their objectives. I commend the draft regulations to the House.

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[Baroness Hoey (Non-Afl)]

My Lords, could I intervene before the Minister responds? I have carefully gone through the Energy Bill Relief Scheme Regulations 2022 and the Energy Bill Relief Scheme (Northern Ireland) Regulations 2022, which are about the same thickness, to see where the differences are. Obviously, we know that the situation is different in Northern Ireland, so there have to be some differences, but it would be helpful if, in winding, the Minister could clarify any substantial differences between how the scheme is going to work in Northern Ireland and in the rest of the United Kingdom. As the Minister is aware, we in Northern Ireland are always wary of being treated slightly differently for some unknown reason that we find out about later. I appreciate that there have to be separate regulations on this, but I would appreciate clarification on any substantial differences.

[Lord Callanan (Con)]

I first thank noble Lords for their contributions to this debate. As I said, the Government have implemented the EBRS GB and NI schemes to ensure that non-domestic consumers are protected from excessively high energy bills over the winter period. The schemes will make sure that the amount that eligible businesses pay for their wholesale energy costs comes down to a reasonable level, with some saving over 50% on those costs.

I am sure it is reassuring for the House to know that the schemes are already in force and delivering support to organisations across the UK. I hope this reassures the public that the Government are committed to taking decisive action to alleviate at least part of this energy crisis.

As well as providing immediate relief, these schemes will support economic growth and have the happy effect of limiting inflation caused by increasing energy bills and the knock-on effects on prices, labour, goods and services. As I said at the start, we are confident that the schemes will seek to avoid firm closures and redundancies and will ensure that vital public services and charities can continue to operate over the winter.

We will continue to monitor the schemes to ensure that this support is provided to the people and businesses that they are designed to help. We are committed to reviewing the schemes by the end of the year and will continue to work with stakeholders to ensure that their feedback is taken into account. We will use the review to look at how best to offer further support to customers who are most at risk from energy price increases beyond April 2023.

I start off with the contribution of my noble friend Lady McIntosh, who asked whether the House would have the opportunity to review the rules accompanying the statutory instrument. It is worth pointing out that the schemes have been set up at pace, and the House of course helped by passing the legislation at pace, to deal with the crisis. Therefore, it is right that the more technical details of the scheme have been included in statutory rules, which have been published on GOV.UK. The first tranche of EBRS GB and NI rules were published on 1 November; amendment rules relating to discount recovery were published on 4 November; and a third tranche of amendment rules relating to disputes and treatment of financially disadvantaged customers was published on 9 November. Minor changes made via amending rules were published on 10 November. If the noble Baroness wants to check on GOV.UK, she can while away her weekend reading the rules in detail. The business support scheme is intended to give immediate relief to businesses and other non-domestic consumers from the current level of inflated electricity and gas prices.

The noble Lord, Lord Lennie, and my noble friend Lady McIntosh asked the good question about what will happen in six months’ time, once these schemes come to an end. I cannot say that I have an answer for the Committee at the moment, because we are still to conduct the review of the scheme, which we have said that we will do by the end of the year. Perhaps if I set out what the review will consider, that will give the Committee some clues as to where we intend to go with this. The review will consider how best to offer further support to customers who are most at risk of energy price increases. By their very nature, they are likely to be those who are least able to adjust—for example, by reducing their energy uses or increasing their energy efficiency. Of course, any further support will begin at the end of the initial six-month support scheme.

My noble friend Lady McIntosh asked something that, I have to say, has nothing to do with these regulations, about lessons learned from Storm Arwen. We have had extensive discussions on that subject in this House. We published a comprehensive review of the recommendations for improvement of the electricity sector in response to Storm Arwen. There were a number of key recommendations covering enhancing system resilience; protecting customers; and additional support, such as compensation. The recommendations are due to be finalised by December 2023, but the majority are already complete, ahead of this winter.

My noble friend also asked about the assessment of the impact of administration and resource costs to Ofgem. Of course, we are working very closely with Ofgem to ensure the effective enforcement of the scheme requirements, and we will ensure that it has the necessary resources to carry out its role in this and many other government schemes operating in the energy sector. Given the pace at which we had to deliver the impact assessments of this time-bound intervention, we have focused on the largest and most significant impact—of course, the direct costs to the Exchequer.

My noble friend also asked about the 28-day disqualification policy. The arrears rule already referred to applies only to the additional discounts that suppliers are required to apply to those qualifying disadvantaged on deemed or out-of-contract contracts. That is in addition to the main EBRS discount.

On the points made about suppliers increasing energy bills, the EBRS scheme is shielding businesses across the country from soaring energy prices. The vast majority of energy suppliers are operating responsibly and within the spirit of the scheme. Of course, we are aware of reports that some companies are being faced with excessively high quotes this winter. I can tell the House that we will take a robust approach to this, and we are working with Ofgem to ensure that the licensing conditions have not been breached and that businesses are able to see the full effects of support offered by the scheme.

My noble friend Lady McIntosh also raised the issue of the UK’s energy resilience in winter. We have a secure and diverse energy system, and we are confident of our plans to protect households and businesses in the full range of scenarios this winter, in light of Russia’s illegal war.

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[Lord McCrea of Magherafelt and Cookstown (DUP)]

I listened to what the Minister said and return to a point raised by the noble Baroness, Lady McIntosh. Do I take from the Minister’s remarks that there is going to be a review after the winter period that is covered by the present legislation? There are many small businesses scattered across the community in Northern Ireland that are totally dependent on electricity and have therefore met this volatility in energy prices. It is hard for them to plan for the future without knowledge of where we will go after the short period covered here. How long does the Minister think the review will take, because these businesses certainly need to plan for the future?

[Lord Callanan (Con)]

The noble Lord makes a very good point. As I said, we will conduct a review as soon as possible with the aim that it will be published before the end of the year. That will inform businesses of where we hope to go with the scheme after its expiry in April. That applies not just to businesses in Northern Ireland but to small businesses across the whole United Kingdom.

In conclusion, the Government remain committed to ensuring that consumers receive help with the rising cost of living and with energy costs. These regulations are vital to ensuring that support is delivered this coming winter. I commend this draft instrument to the Committee.

[Lord Teverson (LD)]

I thank the Minister for his reply to my point on fraud but, as he has not replied on holiday home lets, I assume that, if they are on business rates, they will get this benefit.

[Lord Callanan (Con)]

There are two aspects to this support. The price guarantee applies to domestic consumers and the EBRS applies to business consumers. If it is registered as a domestic premise, the home owner would receive this support in the same way as other owners of multiple homes would receive it—under the domestic scheme. If it is registered as a business, again they would receive a price discount. That applies to all businesses across the UK, with a few exceptions for some generators.

I take the noble Lord’s point about how this will probably go down badly in the areas concerned, but the scheme was rolled out at pace. We saw similar effects with the Bounce Back Loan Scheme during the pandemic. By the very nature of these schemes, if you do not spend years putting the scheme in place, going through every detail and exempting certain groups that might perhaps be undeserving of the support, there will be cases that most people regard as slightly unfair. That is in the nature of rolling something out quickly. We needed to get the support out quickly, which is why this has been done that way.

Motion agreed.