Electricity Supplier Payments (Amendment) Regulations 2017

Debate between Lord Grantchester and Baroness Maddock

Tuesday 21st March 2017 Grand Committee

[Baroness Maddock (LD)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Deben, on these issues. I agree with much of what he has said. I had not intended to speak, but he reminded me, as did the Minister in his opening comments, of how complicated the Bill that put all of this into place was. To this day, some of us still find it quite difficult to get to grips with. I thank the Minister for trying to explain it as well as he did. I miss Lord Jenkin who saw us through that Bill. I was saying to my noble friend Lady Featherstone, who was not here at the time, that Lord Jenkin was the man who really understood what was going on and helped us all through a difficult Bill. I put that on the record.

[Lord Grantchester (Lab)]

I thank the Minister for explaining the amendments to these regulations. They seem eminently sensible, drawn from the experiences of operating the regulations, which are vital to reforming the electricity market and encouraging low-carbon electricity generation to ensure the UK’s security of supply. I also express my gratitude to the noble Lord, Lord Deben, for his helpful remarks as background to the regulations, and for underlining the importance of the progress we have made.

The amendments to the regulations should increase the cost-effectiveness of the two main measures, the CFD scheme and the capacity market, since they reduce the heavy-handedness of the belt-and-braces approach of the CFD counterparty, the Low Carbon Contracts Company, and that of the Electricity Settlements Company for the capacity market. The Minister’s introduction eloquently explained the improvements. These companies exist only to make payments for low- carbon generation or demand-side responses, and to collect these payments from suppliers. The companies must also cover their costs. The regulations set up the system to do this in as transparent, equitable and cost-effective a way as possible, allowing for a sensible amount of reserves as some guarantee. One would hope and expect these payments to balance out through the reconciliation process.

Much of the debate on these regulations in the other place focused on the probability of error. I could join in and tease the Minister by asking him about 20 scenarios, any one of which could be the one occurrence that could not be reconciled. However, that would be facetious. The modelling looks robust, indicating that the companies have the ability to raise the funding necessary in a modern, technologically efficient manner and make the payments required.

The regulations merely deal with the process of funding. The bigger question is the accuracy of the strike price, which is relevant to the setting up of this compulsory regime. Noble Lords will know that that is contained in the contracts agreements and is not part of these regulations. The two most controversial applications relate to nuclear power and the Hinkley Point C plant, and onshore wind.

The Government have shown how quickly they can alter their assessments and mechanisms for adjustment through Part 2 of the Energy Act 2016 in relation to onshore wind and the compensation payments in the FIT regime. On the prevention of double-counting of exemptions in the measure, exemptions from payments are available to suppliers which import renewable electricity from EU member states. This green excluded electricity—GEE—will not count towards electricity suppliers’ market share for calculating their CFD liabilities. This raises questions about security of supply; whether government policy is blind, whether British-based or not; the relative pricing of renewable energy in the UK and in the EU; and whether security-of-supply policy should seek to encourage import substitution. It also begs questions relating to Brexit; I could ask the Minister various hypothetical questions about the internal energy market and any likely scenarios of tariff applications. I imagine he would say that further amendments can be made as circumstances change.

I am grateful for the clarity provided regarding the operational budgets of the two companies and the professional fees increase, brought about by the inquiries of your Lordships’ Secondary Legislation Scrutiny Committee. I very much agree with the Government’s financial policy to expense rather than capitalise software upgrade costs.

I have a few questions about the regulations. First, on the amendment to allow CFD reconciliation determination after the 10th quarter to be classified as non-generation payments, is a longstop provision of time envisaged, or is that included in the general retrospective provisions? Could this be one of those 20 unknown unknowns? Secondly, following the onshore wind provisions in last year’s Energy Act and given that onshore wind is now so much cheaper, are the Government any closer to allowing onshore wind to participate in future CFD auctions now that the threat of UKIP has receded? Can the Minister update the Committee on the position following the consultation on onshore wind in November 2016? Thirdly and lastly, I understand that the net savings to be passed on to electricity consumers are not a cash item and cannot therefore be shown or guaranteed in some way. However, the memorandum states that the operational costs budget of the two companies will increase, resulting in an increase, albeit minimal, in household electricity bills. Will these two features balance out and the net effect on consumers be neutral?

Having said that, I am content to approve the regulations.

Energy Bill [HL]

Debate between Lord Grantchester and Baroness Maddock

Monday 19th October 2015 Lords Chamber

[Baroness Maddock (LD)]

My Lords, this group of amendments highlights something we have already raised today: a lot are technical, they are quite long and we had very little time over the weekend to get round to looking at them in detail. It is not very satisfactory. However, we on these Benches certainly welcome consultation. It is something we have always supported. I am surprised that these amendments dealing with co-operation with other nations with regard to gas and oil were not in the Bill originally as co-operation is rather key. Earlier in the proceedings, I asked whether we are looking at the way Norway operates. I am sure that when it is looking at these matters, it takes them into consideration. I have raised this concern, as have other people, during the passage of the Bill. We find it very difficult to scrutinise properly, in the way this House should, when we get information so late. I shall probably not speak again tonight, but we have another day on Report on Wednesday, and we will be in exactly the same position.

[Lord Grantchester (Lab)]

My Lords, I thank the Minister for explaining these amendments, which reshape disclosure into a separate chapter in the Bill. They all seem reasonable enough, but they give rise to consideration of why they are now being so adjusted. I follow the noble Baroness, Lady Maddock, in her comments about the short notice and the comments made earlier by my noble friend Lady Worthington regarding the future prospects of the OGA and the Government’s intentions regarding it. One wonders whether something has happened. Can the Minister inform the House whether attention has been drawn to them so that they get consolidated? Can the Minister confirm that the Data Protection Act applies to the ODA with regard to information generally and to disclosure? Will he clarify the position and provide some assurances about questions that come to mind in relation to disclosure to third parties? We would support sharing information with other government departments and agencies, including the devolved Administrations, for the purposes of their functions, as the OGA will need to be able to work collaboratively with the different departments and the department itself.

In relation to third parties and foreign Governments, care certainly needs to be exercised and precautions taken with regard to possible unintended consequences. Will anything appear in the public domain regarding the nature and frequency of the sharing of information with foreign Governments? The Minister will be aware that there could be many agencies, especially regarding the environment, where the Government could come under scrutiny in how they handle sensitive information, and where any secrecy between Governments could be misconstrued.

On another point, is the Minister satisfied on the question of the Secretary of State undertaking a review into these matters? Will the Secretary of State have any oversight and details of the information shared by the OGA? Would there be any independent oversight of disclosures regarding legal proceedings and foreign Governments? Could the Minister give an example of the information that might be requested and then shared in relation to these amendments? That would certainly help to settle any disquiet that these powers could give rise to. Meanwhile, the amendments seem well balanced and reasonable.