Contracts for Difference (Electricity Supplier Obligations) (Amendment) (Coronavirus) Regulations 2020

Lord Kirkhope of Harrogate Excerpts

Thursday 2nd July 2020 Lords Chamber

[Lord Kirkhope of Harrogate (Con) [V]]

My Lords, the title of this statutory instrument is long and complex, but the issues are, I think, relatively simple. In order to encourage alternative or green suppliers of electricity, the levy on energy suppliers provides resources to support Contracts for Difference—or CfD—generators. So far so good. However, a combination of seasonal or weather-related issues plus Covid-19 issues has resulted in overall demand for electricity dipping substantially, creating a serious financial position for suppliers. Effectively, therefore, what is proposed is a loan of up to £100 million for the Low Carbon Contracts Company—the LCCC—so that the CfD generators can continue to receive the sums due under their respective contracts.

I therefore have several questions for my noble friend. First, I understand these government moneys are just loans that will be clawed back within a year. How are these loans to be secured and enforced, especially if the suppliers continue to have financial pressures? Secondly, to what extent should general energy prices have any effect in the next year? Are the contracts from the so-called difference auctions flexible in this regard? Does my noble friend understand that low energy prices give rise to the concern that the prices paid for the alternative suppliers are fixed at a much higher rate, especially if these low prices in the market continue, with a depressed economy, the Covid aftermath and resultant low demand?

Thirdly, the reference to “similar exceptional circumstances”, allowing these measures to continue without any further parliamentary scrutiny by even secondary legislation, concerns me. Definitions such as this are imprecise; we need to be sure that they are not used in respect of only slight changes in energy prices, usage or climate variations. Can my noble friend describe what “exceptional circumstances” means? As this measure postpones the levy payments only for a year, and as the costs are ultimately borne by the consumer, can he advise us of the likelihood of a fresh price cap following a new Ofgem determination?

As noble Lords know, as the dispenser of the levy, the LCCC is established as an independent body. I hope, therefore, that this intervention by the Treasury with these loan moneys—for no doubt very merit-worthy reasons—will not affect that longer-term independence which I believe is so vital in these overall energy relationships.