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

Lord Oates Excerpts

Thursday 2nd July 2020 Lords Chamber

[Lord Oates (LD)]

My Lords, I thank the Minister for introducing the regulations so clearly. As my noble friends have indicated, on these Benches we recognise the need to bring forward these regulations in order to tackle the exceptional circumstances that coronavirus has given rise to. It is a reminder of how the pandemic has affected almost every aspect of life. I join the noble Lord, Lord Holmes of Richmond, in paying tribute to the front-line workers in the electricity industry who have worked so hard on our behalf to keep the lights on.

As my noble friend Lady Bowles highlighted, the issue here is not so much the need for these regulations, but how their consequences will work through the system —and indeed out of the system. I note that the impact statement at the end of the Explanatory Memorandum states that there

“is no, or no significant, impact on charities or voluntary bodies”

and that:

“The impact on business is expected to be positive and welcomed.”


The impact assessment also states:

“There is no or no significant impact on the public sector.”


It does not, however, address the potential impact on domestic consumers. Indeed, the only reference to consumers is in the section relating to the positive impact on business, in which the Explanatory Memorandum states:

“It will give electricity suppliers a high level of confidence over the additional costs they will incur for each unit of electricity”


and:

“This will enable suppliers to price the additional costs into consumer energy bills in advance with minimal cost risk.”


I am sure that will be encouraging and reassuring to suppliers, but what about consumers? Will the Minister tell the House what assessment the Government have made of the impact of these regulations on consumer prices in the second quarter of 2021? My noble friend Lady Bowles had a go at suggesting a figure, but it will be useful to know from the Minister whether the Government accord with that. Have they assessed what, if any, impact this will have on fuel poverty, bearing in mind that the impact of even a small rise may be significant on the fuel-poor?

The Government have stated that they regard the loan to the Low Carbon Contracts Company as a one-off response to the current crisis. None the less, they have taken powers in these regulations that are not time-limited. I admit that I would normally be extremely suspicious of Ministers seeking unending powers to tackle what they claim is an exceptional situation. However, given that the reduction in demand has been principally driven by industry, it is unclear how long energy prices in the wholesale market are likely to remain below the strike price, and, as a consequence, whether the Government will need to intervene again. What assessment have the Government made of the trajectory of prices in the wholesale market and how that will impact on the system?

As the Government seek to put the country on the right track to meet our 2050 net-zero target, it is important to bear in mind the points made by my noble friend Lord German. The purpose of the CfD system is to expand investment in renewable and non-carbon sources of energy. It is very important that we bear that in mind as we go forward. Have the Government considered how we may need to adjust market mechanisms in the longer term to support the move away from a carbon economy towards a net-zero figure? What impact does the Minister think the crisis may have on investments in renewables, which have expanded so rapidly and encouragingly in recent years, not least because of the visionary decisions taken by the then Climate Secretary, Ed Davey, during the coalition Government? What steps will the Government take to ensure that the positive picture that has arisen is built on over the coming years?

My noble friend Lady Sheehan raised the important issue of the need for the Government to invest in energy infrastructure through battery storage and other means to help smooth the use of renewables in the supply system. That will be a critical part of building an energy system fit for the future and, in particular, fit to meet the Government’s commitment to net zero by 2050.

I hope that the Minister will be able to answer the questions that my noble friends and I have asked and other noble Lords have raised, but, with that said, we recognise the need for these regulations. We thank the Minister for the clarity with which he introduced them, and we support them.