Energy Prices Bill

Lord Lennie Excerpts

2nd reading
Wednesday 19th October 2022 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I confirm to the Minister that we support the passage of the Energy Prices Bill, but can he explain to the House whatever has happened to the Energy Bill, which has been shelved somewhere, waiting for someone to make a decision about its future? Without support, consumers and small businesses would be facing an eye-watering increase in their bills—estimated to be somewhere between £5,000 and £10,000, respectively—so the Government have acted and the Opposition support them in doing so. Having said that, they are in a deep mess entirely of their own making.

To give noble Lords a recent example, on Monday I, and perhaps other noble Lords, received a letter from the Minister inviting me to yesterday’s briefing about this Bill. In the letter, the Minister wrote in the first highlighted, bullet-pointed paragraph:

“The Energy Price Guarantee will ensure that a typical household in GB pays around £2500 a year on their energy bill for the next 2 years from 1 October 2022”.


About half an hour after I received this invitation, this month’s Chancellor announced a screeching U-turn, and the two-year pledge went down to six months. Did no one tell the Minister before he wrote the letter? It reminds me of Prufrock:

“In a minute there is time

For decisions and revisions which a minute will reverse.”

My first overarching question to the Minister is this: can we rely on anything this Government are now saying?

The Energy Prices Bill is facing parliamentary scrutiny after it has been acted on. I thank the Delegated Powers and Regulatory Reform Committee for the report it published this morning, which is in essence a condemnatory judgment of the Government. The Bill has to take effect from 1 October 2022, but what does it do and what does it not do?

The unit price cap will mean an average consumer’s annual bill will rise to £2,500, in contrast to Labour’s fully funded price freeze at about £1,900 from September. There is no additional support for the 15% of off-grid households, in contrast to Labour’s plan which would provide £1,000 of help. There is also no additional support for customers on prepayment meters—4 million households—who use approximately 60% of their energy over the winter months as bills are not smoothed out. This contrasts with Labour’s plan, which would save them an average of £1,300. Ten million families will still spend more than 10% of their income on energy, according to a recent study by the University of York.

I turn to the windfall tax—or non-windfall tax—and how the Government propose to pay for this measure. They have spent the last period in office rubbishing the very idea of a windfall tax as “unconservative”, but in Clause 16 we see a windfall tax in anything but name that the Secretary of State may impose on the energy giants. The clause is titled

“Temporary requirement for electricity generators to make payments”.


I will read it out:

“The Secretary of State may, for a purpose mentioned in subsection (2), make regulations for, and in connection with, requiring periodic payments to be made to a payment administrator by … specified electricity generators … electricity generators that are of a specified description, or … electricity generators that are designated by the Secretary of State in accordance with the regulations … The purposes are … the purpose of enabling a payment administrator to obtain funds for paying to electricity suppliers in connection with reducing the cost to customers of electricity … the purpose of enabling a payment administrator to obtain funds for meeting expenditure incurred or to be incurred by the Secretary of State in reducing the cost to customers of electricity.”


If it sounds like a windfall tax, if it smells like windfall tax—it is a windfall tax. Even John Redwood described it as a “surrogate windfall tax” in the other place. Energy giants are making £170 billion in excess profits, and they may be required to make payments. Let us call it what it is: a windfall tax, and the Government should do it properly. The level set must contribute significantly to the price support for businesses and consumers. The Government must now end the absurd multi-billion-pound loophole in the windfall tax for oil and gas companies. Above all, it must be fair to customers.

Oil and gas companies are currently enjoying a massive loophole for investing in fossil fuels, so why do the Government think it right to leave billions of unearned, unexpected windfall gains in the pockets of oil and gas giants, thereby forcing people to pick up more of the costs of this support in higher borrowing and higher taxes for the future? How can the Government defend tilting the pitch away from cheap, home-grown, low-carbon power in favour of expensive, insecure, planet-wrecking fossil fuels? The powers are ill defined, the size of the levy is unknown and how much it would raise is unclear. How will the Government ensure fairness with a fossil fuel windfall tax?

The Labour Party will bring forward amendments to the Bill. In line with our fully funded policy, we would seek for the energy price guarantee to take effect from 8 September rather than 1 October. The powers in Clause 21, highlighted by the Delegated Powers Committee, and Clause 22, to modify energy licences and issue directions to licence holders, are a power grab by the Secretary of State. They are not compellingly justified and should be subject to proper parliamentary scrutiny, not the negative procedure. The Delegated Powers Committee is disdainful of what it calls “camouflaged legislation” in the Bill, saying it is “inappropriate”.

For the Government to think that the answer to a slow-to-react regulatory regime is to override it by giving powers to the Secretary of State is fanciful, especially now, with confidence in the Government’s handling of affairs at an all-time low. There is no long-term plan to get us out of the crisis. Electricity and gas prices should be delinked, and Labour would require the Government to develop a plan to do this. Consumers need some certainty to be able to plan for their futures.

There is an unfair £5 billion loophole in the existing windfall on fossil fuels, introduced by the previous Chancellor or the one before. For every £1 invested in oil, gas and fracking, companies get back 91p. Nothing like that exists for renewables or nuclear fuel, and we need this to be levelled up.

We would require the Government to report, assessing the impact of reducing the Energy (Oil and Gas) Profits Levy Act investment allowance from 80% to 5%, particularly on bills. We would also require the Government to assess the revenue and profits of electricity generators and oil and gas producers on a six-monthly basis.

On renewables, Defra is seeking to block landowners from developing solar energy farms. Some 0.1% of agricultural land is currently used for solar energy generation. If that is increased tenfold, it would mean that 1% of agricultural land was used in this way. Who does not like solar energy panels, and why not? They are capable of producing the equivalent of what 10 nuclear power stations produce for the country. We previously heard the noble Lord, Lord True, talk about the need for self-sufficiency in energy; this would be a good start.

We will lurch from crisis to crisis if we do not learn the lessons from this one. We must become much more self-sufficient in our energy production. This will mean a sprint for growth in renewables and nuclear, and a massive programme of energy efficiency across the country. The powers are with the Government, and I commend this to the House.