Energy Prices Bill

Lord Teverson Excerpts

2nd reading
Wednesday 19th October 2022 Lords Chamber

[Lord Teverson (LD)]

My Lords, I once again declare my interest in the energy storage industry. What a Bill—it seems we are all agreed on what we are trying to do, but none of us agrees on how we are going to do it. Yet we have this very short timetable to complete the Bill, effectively now on Tuesday, although it was going to be Monday.

We have had a big break since the Energy Bill, which has somehow disappeared before it got to my best amendments, so I am extremely disappointed personally that it has been postponed. However, I spent my time well over our various recesses with my chainsaw, sawing up all my homegrown logs—they are three years old, so low-particulate. I spent a lot of time on that and am pleased to say that the Teverson household has not yet turned on our central heating. I hope to get beyond that critical date of 22 October when everyone switches it on.

It is interesting that, apart from the Minister, we have not had a contribution from the Conservative Benches tonight, although they have a past Energy Minister on their Benches, the noble Lord, Lord Marland, whom I enjoyed working with during the coalition Government.

A number of themes have come out clearly this evening. The most powerful, from the Delegated Powers Committee, is the huge range that the Government and the Secretary of State have been given here. Clause 22 was mentioned, but I particularly looked at Clause 13(2), which says:

“The Secretary of State may take such other steps as the Secretary of State considers appropriate in response to the energy crisis.”


I was thinking about what that could include. The most obvious step, given one of the main sources of energy price increases, would be to declare war on the country that is causing us this problem. That power seems to be in the Bill. I assume, despite the chaos of the Government at the moment, that will not take place. It illustrates the huge powers that are in the Bill.

I refer specifically to amending licences. I do not think this has been mentioned in the debate although many noble Lords have mentioned powers more generally. I would be interested to understand from the Minister why that particular power is in the Bill because, despite all the advice we have from energy companies, this is the one that seems to move away from the neutral, reliable, regulatory system that we have and seems to breach it. I would be interested to understand why that is included.

We heard also from many Members of the House—the noble Baroness, Lady Hayman, for instance—about the discrimination that there seems to be between renewables and the fossil fuel industry, both in terms of the way they are treated and whether the cost-plus revenue limit is a tax. It is obvious that it is really, but it does not have the ability to bring back money for investment in the industry. There is a difference in those schemes, with the fossil fuel scheme lasting until 2025, I think, and the powers in terms of the renewable sector until 2027. Why is that there? It is inconsistent and goes against government policy, or certainly declared government policy, and perhaps the Minister could explain that further.

We have little information about the cost-plus revenue limit itself. There are great powers for Ministers again. There has been very little consultation. I understand the consultation is still to happen. Perhaps the Minister could tell us what the timetable will be on that: will it be microseconds, hours, or maybe even reach to days? It would be useful to understand something that is so important.

I was pleased to hear from the noble Lord, Lord Rogan, about the £100 payment because I was not aware of the situation in Northern Ireland. I am not on a gas system myself, but in England most people are. It was a very interesting point. I do not fully understand the £100. We all know that if you put a round number in a bill, it is a made up number—that is where round numbers come from. If you have any sense, you put it at £98.20 or £102.50, to convince us that there is some science behind how that amount was reached. I would be interested to understand where that comes from. I think it really does discriminate against a lot of rural Britain that is not able to plug into the gas network, as many people say.

I am a great supporter of contracts for difference. They have been a saviour in many ways. They were introduced during the coalition Government, they are well supported by the present Government, and they seem to offer fantastic balance between fairness in terms of cost and certainty in terms of investment. They have worked well. I like the idea of trying to transition many other power producers on to CfDs. We have here a voluntary mechanism to be able to do it. I understand that one of the selling points the Government are giving this is that it takes out risks or gives certainty, but I still find it difficult to understand why organisations or companies would make that transition. I would be interested to hear more from the Government about why that should be the case.

I will finish by saying that the one thing that strikes me most about the Bill, and this whole philosophy, is that there is not an exit strategy. There is no way out of this. The only way out is if, perchance, energy prices themselves come down in the future. There are all sorts of reasons, I hope globally, why that might be the case, but we have no assurance of it. It seems to me that the fundamental obscenity of this situation is that we are likely as taxpayers to pay altogether on the two schemes—what is in this Bill and what has come before—up to something like £137 billion in current expenditure on keeping bills down, yet our energy infrastructure in this country in terms of housing, as the noble Lord, Lord Foster, said, will be as weak and pathetic as it is now after we have spent that money. How much better it would have been if we had previously invested that money to reduce demand, yet we failed to do that. Once we get through this winter cycle, or maybe the one after, or the one after that, we will still have the same inefficient energy structure in this country that we had before. To me, that is the greatest challenge.

The Bill is needed, but the way it is implemented is far from perfect.

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[Lord Callanan (Con)]

I thank all noble Lords for their contributions to this important debate today. I will respond to as many as possible of the issues that were raised in the time that is available to me.

I start by briefly reminding noble Lords of the importance of the Bill. Russia’s illegal war in Ukraine has led to a global energy crisis, and the Government are taking urgent action now to support households and businesses across the UK which would otherwise face significant financial difficulties this winter. I know that many speakers in the debate recognised that. This legislation will ensure that households, businesses and other bodies such as charities and public organisations—and indeed churches—receive the financial support that they need by providing the framework to deliver the Government’s energy support package. In so doing, the Bill will help drive down inflation and support economic growth.

I turn to points raised by noble Lords in their contributions. First, I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, for their letter that I received this morning on the Energy Security Bill. I will respond to them in writing shortly, but I assure the House that the government remain committed to the important measures in that Bill to deliver change in the energy system over the longer term. We have to deal with the short-term crisis but we are not forgetting the longer-term context, and many of the measures in that Bill are to ensure that changes are made in the regulations that will benefit us all in the long term.

In the meantime, we are facing a global energy crisis, and we must ensure that we prioritise delivering the measures in this Bill to provide that much-needed support to consumers. I will say a few words about why it is so important to get this legislation passed soon. I thank the noble Baroness, Lady Worthington, and the right reverend Prelate the Bishop of Manchester for raising the important issue of the speed of this legislation; I readily accept that we are going through it extremely rapidly.

Households and businesses face rising energy prices, and it is essential that this legislation and subsequent secondary legislation that will be laid under it is in place by the end of this month. This is to allow for urgent financial assistance for householders, businesses and other organisations across the UK ahead of the winter, and particularly from the start of November.

Building on the DPRRC’s report, the noble Lords, Lord Lennie, Lord Teverson, Lord Foster and Lord Grantchester, and the noble Baronesses, Lady Worthington and Lady Young, raised concerns about the delegated powers in the Bill. Again, I pay tribute to the work of the DPRRC and thank the committee for its report, which I will also respond to shortly. The Bill takes a relatively limited number of powers but I readily accept that they are broad ones. They are essential for ensuring that these crucial support schemes can be stood up at pace. The House will appreciate the speed at which this measure has been drafted. I pay tribute to the exemplary work of the officials involved in delivering it; it has involved lots of late nights and weekend working for them, for which I thank them. It is essential that these measures are delivered as intended. To be frank with noble Lords, these powers will allow us to do this with the appropriate scrutiny.

As I said in my introduction, the vast majority of the powers in the Bill are effectively time-limited through either direct sunsetting—normally, noble Lords are calling on me to sunset powers—their link to other powers in the Bill, or indeed the duration of this energy crisis. The ability to extend time limits ensures that we have sufficient scope if we need to change them over time. I assure the House that noble Lords will of course have an opportunity for further scrutiny on the details of those schemes via the secondary legislation route, much of which is subject to the affirmative procedure.

A number of noble Lords raised concerns about the powers in Clauses 21 and 22, specifically powers to modify licences and give direction; those concerns were also reflected in the DPRRC’s report. In my view, these powers are necessary to facilitate the delivery of a number of support schemes, including the Northern Ireland energy bills support scheme and the alternative fuel payment for domestic and, potentially, non-domestic customers as well. Let me make it clear to the House that, under the terms of the Bill, Clauses 21 and 22 must be used in response to the current energy crisis. Using the powers in either clause in relation to action under any of the other powers in the Bill is in effect time- limited, as these powers are themselves time-limited.

As expected, and as always happens in these debates, many noble Lords raised the important issue of energy efficiency. A crisis gives even greater urgency for action to make homes more energy efficient in order to reduce energy bills and, crucially, to tackle fuel poverty. That is why the Government are investing £12 billion in our Help to Heat scheme, including £1.5 billion to upgrade around 130,000 social housing and low-income properties in England. I was able to launch an additional £800 million of that scheme in discussions with housing associations and local authorities only last week.

The Government have also announced further support on energy efficiency through the ECO Plus measures. This scheme was announced in the mini-Budget—it is one of the few measures from the mini-Budget to have survived so far. It will help hundreds of thousands of households to reduce their energy bills by targeting that support to the most vulnerable. Of course, as it is an obligation, we will consult on the detailed policy design of ECO Plus shortly; I am sure that noble Lords who take an interest in these matters will want to contribute. We hope to have the scheme up and running by April next year.

In addition, our energy security strategy sets out further commitments to support property owners, including facilitating low-cost finance from retail lenders to help consumers upgrade their properties at low cost. This includes zero-rating VAT on the installation of insulation and low-carbon heating for the next five years. That will potentially save up to £2,000 on the cost of an air source heat pump—should the noble Baroness, Lady Young of Old Scone, want to move in that direction.

The noble Lord, Lord Lennie, and the noble Baroness, Lady Young, raised the cost-plus revenue limit. The Government recognise the importance of dispatchable and baseload generation for security of supply. The low-carbon technologies that can deliver these types of power, such as biomass and nuclear, tend to have higher input costs. This is being considered as part of the detailed policy design for the cost-plus revenue limit. We intend the limit to last only for as long as it is strictly necessary. A number of noble Lords referred to the five-year sunset provision. That would allow the Government to respond to the immediate effects of high wholesale prices on consumers while ensuring their ongoing protection if gas prices remain abnormally high for a prolonged period beyond current expectations.

[Lord Teverson (LD)]

Can the Minister clarify that renewables on the cost-plus, whether hydro, solar, wind, AD or whatever, will be assessed separately within those different sectors, rather than it being an across-the-board average?

[Lord Callanan (Con)]

That goes back to the point I made in my introduction. There are many different circumstances facing different providers. Some of them have pointed out quite loudly that they have sold their power in long-term contracts, et cetera, so it varies from provider to provider. However, the noble Lord gives me the opportunity to say that the precise mechanics of the temporary cost-plus revenue limit will of course be subject to a full consultation, which we will launch shortly.

The noble Baroness, Lady Worthington, raised important issues on who should bear the cost of the measures. The energy profits levy on oil and gas and the cost-plus revenue limit that have been announced for low-carbon generators will help to fund these schemes. The scale of the crisis means that the sums involved are beyond those two mechanisms so higher borrowing will be necessary to pay for this temporary support, and it is right that we use all the available tools to support businesses through this crisis and to spread the costs over time.

The right reverend Prelate the Bishop of Manchester, the noble Baroness, Lady Young—

Energy Prices Bill

Lord Teverson Excerpts

Committee stage
Monday 24th October 2022 Lords Chamber

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I apologise for not speaking at Second Reading. I did listen to the Minister’s opening speech and I had made my views clear in an earlier briefing. My views sync very closely with those of the noble Lord, Lord Rooker. Quite honestly, this Government are out of control—we have known that for months, if not years—and it is time they understood they are not acting in a democratic manner. This is a “something must be done” Bill, and I understand why something must be done. However, it has so little detail, and the Government are expecting us to take this on trust. I do not trust the Government, and so there is a big problem here for me.

There are two big issues. First, these energy price schemes will make the difference between people being able to pay their bills or not pay their bills, and whether they can feed themselves, clothe their kids and that sort of thing. We have to be sure of all this detail. The Government are proposing to fill in about 90% of the Bill’s details at a later date, and they expect us to just wave it through. We cannot know the impact of this Bill on ordinary people.

Secondly, the Government have been determined to protect the profits of oil and gas companies, which we all know is a piece of idiocy when we look at the climate emergency. That profit will probably be reinvested in creating more opportunities for the oil and gas industry. The Government take a different approach to renewables, and this will cause a long-term disruption to renewable development. I would argue that investors will be encouraged to invest more in dirty oil and gas, rather than in clean renewables. That is a huge bailout for all those stranded carbon assets, and seems to me to be a completely illogical way to move forward.

I sense that the Government might mean well—actually, I am being too generous. I understand that something must be done, but this is not it. I want the Minister to explain those two issues. Will people be able to pay their bills? Will this cause more investment in dirty oil and gas?

[Lord Teverson (LD)]

My Lords, I will speak to Amendments 27, 31, 34 and 40. What I have to say is very much in line with the speeches that have already taken place and I will not detain the House for long, except to make this point again. We understand the urgency of the Bill, for the health of households and their heat and energy over the next winter, and that of businesses as well, but there is a lot else included in this Bill that need not be rushed through in the same way.

I turn to Amendment 27. On reading the Bill, I was quite shocked—the noble Lord, Lord Rooker, forensically went through this in principle—that it says on page 21, in Clause 22 (4)(a), that these directions “must be in writing”. These are key bits of government policy, where a Secretary of State or a person who is subject to directions under this clause—we do not even know who it might be—is able to just write what should happen. Our own amendment would substitute that with

“made by regulations subject to the affirmative procedure”.

Amendments 31 and 34, with Amendment 34 relating to Northern Ireland—it is great to see the noble Lord, Lord Rogan, here following his contribution during the Second Reading—would remove the powers of sub-delegation.

Amendment 40 is around the sunset clause, which again the Opposition has, quite rightly, majored on. Here, we have put down a two-year limit.

Clearly, the Bill goes way beyond the authority given to the Government and the Secretary of State, without reference to Parliament. Some of these amendments must be voted on for the Bill to be put right and sent back to the House of Commons.

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Moved by

[Lord Teverson]

5: Clause 9, page 8, line 19, at end insert—
“(4A) Regulations under this section must apply to non-domestic customers—(a) that signed a fixed tariff agreement with their energy provider after 1 December 2021, and (b) on variable rates tariffs.”Member’s explanatory statement
Currently non-domestic customers who signed a fixed tariff agreement after 1 April 2022, and those on variable rates tariffs, benefit from the reduced energy charges. This amendment would extend this support to those customers who signed fixed tariff agreements between 1 December 2021 and 1 April 2022.

[Lord Teverson (LD)]

My Lords, I shall speak also to Amendment 6 in this group. Amendment 5 relates to the extension of the energy bill relief scheme for non-domestic customers. I hope that it is something that the Minister will be able to agree or reaffirm from the Dispatch Box, because it is really very straightforward. When the scheme was announced by the Government, only businesses that signed a fixed agreement after 1 April 2022 and those on variable rates were set to benefit. Businesses with energy agreements signed before this date—I repeat, that was 1 April—were unable to get a subsidy to their unit prices.

In the debate on the economy and the growth plan of 2022 in the House on Monday 10 October—so not so long ago—my noble friend Lord Fox raised this with the Minister, who responded that the Government would be “revising the cut-off date” so that contracts taken out between 1 December 2021 and 31 March 2022 would be “eligible for relief”. Can the Minister confirm that this is still the Government’s intention? If it is, given the uncertainty that businesses are facing with the current state of government, will he accept my Amendment 5, which seeks to put that commitment in the Bill? I see no reason why that should not be the case, to give absolute clarity and greater certainty to the non-domestic sector.

On Amendment 6, the alternative fuel payment scheme is intended to deliver a one-off payment of £100 to UK households which are not on the mains gas grid—I declare my own interest in that I rely on biomass and oil—and therefore use alternative fuels such as heating oil to heat their homes.

Powers in the Bill will enable the Government to deliver support via electricity bills under a similar delivery model to the energy bills support scheme, which, as noble Members will know, is a £400 non-repayable discount for eligible households to help with their energy bills, as announced in April by then Chancellor and soon-to-be Prime Minister Rishi Sunak. Households who are eligible for but do not receive alternative fuel payments or the £100 heat network payment—a very round number, as we saw on Second Reading—because they do not have a relationship with an electricity supplier, for example, will receive the £100 via this alternative fund, which will be provided by a designated body. According to the Government, they will set out timing and details of this payment soon. I look forward to hearing from the Minister whether we have any more detail at this time.

It is estimated that more than 4 million people in the UK are off the mains gas grid and rely on other means to heat their homes. As I know in Cornwall, fuel poverty is greater in rural areas than in urban areas and, crucially, it is often deeper, meaning that rural families need to save more money to make sure their energy bills are affordable. This amendment says that it is vital that a fast and easy way to use this system be set up to get these payments to them. Amendment 6 would ensure that payments are made directly to consumers’ bank accounts, which is clearly the quickest and easiest way to make the biggest difference to rural and off-grid customers. Therefore, I hope the Government will be able to accept this amendment, but I certainly hope that the Minister will be able to give more detail and a timeframe so that these particular consumers know their future. I beg to move.

[Lord Lennie (Lab)]

My Lords, our Amendments 37 and 38 seek to backdate the electricity and gas price reduction scheme to 8 September, which was the day the Government first announced the energy price guarantee. Apart from anything else, this would produce money to be passed on to customers’ bills. It may seem a small change, but it would be extremely popular among all UK households.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Lords, Lord Rooker, Lord Teverson, Lord Lennie and Lord McNicol of West Kilbride, for their amendments, which seek to make changes to the schemes to reduce energy bills—namely the alternative fuel payments, the domestic energy price guarantee and the energy bill relief scheme.

First, turning to Amendment 5 tabled by the noble Lord, Lord Teverson, on the energy bill relief scheme, I am pleased to note that he agrees with the decision to extend the eligibility date for customers on fixed-term contracts back to 1 December 2021, which my noble friend Lord Callanan confirmed in this House on 10 October. This will be implemented in regulations. I can give further reassurance that when the scheme was first announced on 23 September, it stated that all non-domestic customers on variable contracts, as well as deemed and flexible contracts, will be eligible for the scheme. Given that these details have already been published and will be implemented in regulations, the proposed changes to the Bill are unnecessary. I hope that gives the noble Lord the reassurance he was seeking.

I turn to the amendment tabled by the noble Lord, Lord Rooker, which seeks to remove Clause 9. This clause provides for the establishment of the energy bill relief scheme in Great Britain. This scheme will provide a price reduction to ensure that all businesses and other non-domestic customers—for example, charities and public sector organisations such as schools and hospitals—are protected from excessively high energy bills over the winter period. Under the provisions in Clause 9, the Secretary of State may, by regulations, reduce the amount that all eligible businesses and other non-domestic customers would be charged for their gas and electricity. Clause 9 allows for this through the calculation of a notional wholesale price for gas and electricity, referred to as the government-supported price, with a discount being provided which pays the difference between the government-supported price and the wholesale price.

The clause provides for regulations to detail how the Government may calculate this reduction. We intend for the scheme to run initially for a six-month period. Schedule 6 to the Bill allows for the scheme to be extended for up to three further consecutive periods for up to two years. We recognise that the diversity of contracts between suppliers and their non-domestic customers makes implementation of the scheme complex. This clause therefore provides for necessary powers to support successful delivery of all aspects of the scheme, and to allow the Government to respond appropriately to any rapid changes in the market. I therefore ask that Clause 9 stand part of the Bill.

Turning to Amendment 6, tabled by the noble Lord, Lord Teverson, on the alternative fuel payment scheme, households eligible for the domestic alternative fuel payment scheme in Great Britain will receive £100 as a credit on their electricity bill under a similar delivery model to the energy bills support scheme; we are exploring a similar route for Northern Ireland. We understand that consumers are already experiencing significantly increased living costs, and that is why the Government are delivering this support to customers as fast as possible and have committed to delivery of the payment this winter. Requiring that payments be made direct to consumer bank accounts would significantly slow down the ability to deliver, meaning that the target to pay this winter would be unlikely to be met. This Government do not have an established direct relationship with the relevant consumers, and a bespoke delivery scheme would need to be created, which would take significant time.

Delivering the domestic alternative fuel payment as a fixed credit amount via electricity bills will be significantly quicker than other possible routes and means that customers need take no action to receive it. Consumers eligible for the domestic alternative fuel payment but who do not have a relationship with an electricity supplier will receive the £100 via the alternative fuel payment discretionary fund. Details on how to access this fund will be confirmed shortly.

Turning to Amendments 37 and 38, on the domestic energy price reduction scheme, tabled by the noble Lords, Lord Lennie and Lord McNicol of West Kilbride, I thank the noble Lords for their amendments to enable backdating of the electricity and gas price reduction scheme in Great Britain to 8 September. The energy price guarantee was implemented from 1 October so that consumers can expect to pay well below the scheduled increase in the price cap to £3,549 for a typical dual-fuel household. The energy price guarantee has been designed to work in combination with the May 2022 cost of living package to ensure that the most vulnerable households will see little change in their energy costs between last winter and the coming winter. I therefore see no need to alter the operative date of the energy price guarantee schemes. I hope that on this basis, the noble Lords will not feel it necessary to press their amendments.

[Lord Teverson (LD)]

My Lords, I very much welcome the Minister’s statement on the backdating to December, and that the obligation that was accepted by the Minister earlier this month is to be repeated. I thank her for that, but I am not quite sure where we are with households that are due the £100 but who do not have a relationship with an electricity supply company, which is probably not insignificant. Before I withdraw Amendment 5, can the Minister be a little clearer on how this is going to function?

[Lord Callanan (Con)]

The noble Lord makes a good point. As he correctly observes, it is difficult to implement in practice because by their very nature, those households do not have a relationship with their energy supplier. We are urgently looking at a delivery mechanism, with all the appropriate protections against fraud et cetera. Delivery is likely to be through local authorities, but we are still working on a precise mechanism and as soon as we have more details, we will update the House.

[Lord Teverson (LD)]

I thank the Minister for that. If you cannot do it directly through Ministers, then through local authorities is probably the right way to do it. I know that Cornwall council is already starting to make some preparations in that area. I beg leave to withdraw Amendment 5.

Amendment 5 withdrawn.

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Moved by

[Lord Teverson]

8: After Clause 15, insert the following new Clause—
“Report on effectiveness of energy efficiency programmes in reducing energy costs
(1) Within six months of the day on which this Act is passed, the Secretary of State must review the impact of energy efficiency programmes in reducing energy costs in accordance with this section.(2) A review under this section must consider the impact of—(a) the number of homes and business properties which have increased their EPC rating,(b) the number of homes and business properties which have undergone retrofitting programmes, including— (i) fitting of solar panels, and(ii) replacement of gas boilers,(c) increases in renewable energy sources, and(d) public messaging campaigns into changing energy usage habits.(3) The Secretary of State must lay a copy of the report before each House of Parliament.”Member’s explanatory statement
This new Clause would require the Secretary of State to report on the impact of energy efficiency programmes in reducing energy costs.

[Lord Teverson (LD)]

My Lords, we come back to a subject we always discuss in energy Bills, whether the dormant Energy Bill or the Energy Prices Bill in front of us today: energy efficiency and demand reduction. Whatever the Government say from their Front Bench about what is being done, it is quite clear that this is not seen as a priority in reality. Indeed, as far as I have noticed, it does not feature to any significant extent in this Bill. However, although I accept that the Bill is very much about short-term measures, we still have to look forward to the medium and longer term and how we make sure that, after the payments we are making and the Bill intends to make into the future—which are substantial, with estimates varying from £40 billion to £100 billion, depending on how long these measures last—we do not go back to square one whenever such a crisis arises again, despite having spent literally billions of pounds of taxpayers’ money.

This is a very mild amendment. We are being modest because we hope that the Government will accept that we should have at least something in the Bill about energy efficiency. We are asking for a proper and comprehensive review of costs to do with energy efficiency within six months of the Bill being passed. As noble Lords can see from the amendment, we are asking for a review of the impact of

“the number of homes and business properties which have increased their EPC rating … fitting … solar panels, and … replacement of gas boilers, … increases in renewable energy sources, and … public messaging campaigns”.

I would be interested to understand where the Government are on public messaging campaigns at the moment. I understand that the almost-past Government very much resisted them. Can the Minister give us more of an idea of where we are now?

What I am emphasising here is that it is essential that energy efficiency and demand reduction should be at the top of the list of tools of energy policy as a way forward. We clearly need some reference to them in the Bill, while we are making these huge payments, to make sure that businesses are able to continue in the future and that households can afford their energy bills without going into debt—although I fear that many will in any case. That is the core of this amendment and we take this very seriously. We believe that the Government have not performed sufficiently on this during their time in government.

I will also speak briefly to Amendment 9, and I thank the noble Baroness, Lady Bennett of Manor Castle, who is not in her place at the moment, for her support. Amendment 9 looks forward to where we go after this major splurge of public expenditure. I think a consensus is coming—from consumers, consumer groups and energy companies themselves—on how we need to treat energy Bills in the future, in that we have to move to a different place. One place we could move to is a social tariff. Nothing is perfect in this world. We know that in a situation where people move out of the definition of qualifying for a social tariff, it can have negative effects on income or whatever.

A social tariff would mean those households in fuel poverty being able to solve that issue by paying a different tariff on their electricity from those not in that degree of poverty. We all know that, even without the current crisis, many millions of households are in fuel poverty. This has not been solved by Governments over the years. The long-term way is energy efficiency and demand reduction but, in the medium term, surely we should start planning now for something of the order of a social tariff. I beg to move.

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

My Lords, the noble Baroness, Lady Thomas of Winchester, is taking part remotely and I invite her to speak. She does not seem to be technically available at present; it is therefore open to any other noble Lord to speak to this amendment.

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[Lord Teverson (LD)]

My Lords, I welcome the Minister’s response to my noble friend Lady Brinton on that important issue. He said that there are already lots of statistics for energy efficiency: absolutely, there are. They are all over the place, and every time you need to search for them, you have to work out what they are. One, from the energy poverty statistics, points out that, in England alone, 3.6 million households are in fuel poverty. That was in 2020, before this crisis.

Although the Bill, which we welcome in principle, is there to solve that problem—or not make it any worse—let us remember that the present average price cap is £2,500 per household, which is getting on for double what it was in 2020. So the level of fuel poverty will hugely increase.

There may be good will or a wish among the Government but, whatever the Minister says—I do not doubt his sincerity—there is never a major move forward in the form of action on energy efficiency and demand reduction that actually makes a difference. As my colleague and noble friend Lord Foster, and the noble Lord, Lord McNicol, said, we have some of the least efficient housing and commercial building stock in this country. That is why we need to reboot the whole energy efficiency and demand reduction conversation, which must lead to action. This amendment is not the end of that process; it is a modest but essential start. On that basis, I wish to test the opinion of the Committee.

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Moved by

[Lord Teverson]

13: After Clause 15, insert the following new Clause—
“Energy profits levy
(1) The Secretary of State must lay before Parliament an assessment of the additional revenue that would result from the following policy measures—(a) amending the Energy (Oil and Gas) Profits Levy so that it applies to oil and gas profits incurred since 1 October 2021,(b) removing from the Energy (Oil and Gas) Profits Levy allowances for investment in oil and gas extraction,(c) increasing the rate of the Energy (Oil and Gas) Profits Levy beyond 25%, and(d) implementing a windfall tax on the excess profits of coal- and gas-fired power stations.(2) In addition, the Secretary of State must lay before Parliament an official estimate of the oil and gas super profits over the next 2 years.(3) The Secretary of State must lay the report before Parliament no later than 31 October 2022.”Member’s explanatory statement
This new Clause would require the Secretary of State to lay a report before Parliament detailing the impact of expanding the government’s Energy (Oil and Gas) Profits Levy.

[Lord Teverson (LD)]

My Lords, without, I hope, taking away too much tension from the Committee, I am not going to press this amendment so I shall be relatively brief in explaining it. It has an important basis in the Government’s Energy (Oil and Gas) Profits Levy Act. It also has an element of looking at how the Bill and previous schemes discriminate against the renewables industry compared with fossil fuels.

A key element of Amendment 13 is to assess the impact of that date in the levy so that it applies to oil and gas profits incurred since 1 October 2021. The Government’s energy profits levy is effective from 26 May, meaning that profits accrued before that date are outside its scope. It was clear over a year ago that surging profits for the oil and gas companies were in stark contrast to the real struggle faced by ordinary people and small businesses faced with high and soaring energy costs. In fact, it was one year ago today that my right honourable friend Ed Davey MP called for the windfall tax on the profits of oil and gas companies, accompanied in due course by other parties and other parties represented in this House.

If the Chancellor had responded at that time and a levy had been in place from October, it would have raised billions more. If I could just remind the Committee of the profits since then, BP saw profits rise by 138% between quarter 1 of 2021 and quarter 1 of 2022—from £2.6 billion to £6.2 billion; it was similar for Shell. These combined super-profits alone amount to £7.5 billion in the first quarter of 2022. That is £7.5 billion more than they made in the same quarter in 2021. Had those windfall profits had been taxed by the same amount, it would have raised £1.8 billion.

What we are looking for in particular here has to do with the levy. Like proposed new subsection (1) in Labour’s Amendment 14, proposed new subsection (1)(b) in Amendment 13 calls from the removal of allowances in the levy for investment in oil and gas extraction. This is one of the key differences between the revenue cap on renewables and the fossil fuel industry, where there is that huge investment incentive of getting 80% back for investment in—dare I say?—fossil fuels, obviously. That is where we want there to be quality.

We on these Benches know, as do Members from other parts of the House, that renewables, rather than fossil fuels, are really the way forward. The Government have committed themselves to a large amount of investment in offshore wind. We recognise that but we need to keep at least a level playing field in taxation matters between renewables and fossil fuels. I very much believe that we need then to push investment in renewables further forward. I beg to move.

[Lord Lennie (Lab)]

My Lords, the whole question of the energy market is complicated and beset by a series of legislative procedures which can cause confusion. That said, the new clause proposed by Amendment 14 would simply require the Secretary of State to produce a report assessing the impact of removing the investment allowance from oil and gas companies, as set out in the Energy (Oil and Gas) Profits Levy Act, and, in particular, to assess the impact on domestic and non-domestic users. Currently, oil and gas companies receive an 80% rebate on every pound invested but that is not available to renewables or other zero-carbon technology. This appears to tilt the market away from investments in cheaper domestic clean power sources towards oil, gas and fracking.

The proposed new clause would require the Government to assess the revenue and profits of electricity generators and oil and gas producers every six months, to see what the effects would be. Amendment 20 would require the Secretary of State to disaggregate the cost of production of natural gas from the cost of production of other energy sources to reduce the cost of electricity to domestic and commercial consumers. This dates back to when gas was the only game in town for energy companies; now, renewables account for 43% of the generation mix.

Gas prices have increased fourfold since the beginning of 2011, which means that consumers are paying much more for electricity than the average cost of generation across the market. Splitting the market is a likely consequence, by creating a separate pool for cheaper, intermittent, renewable generation and a second for traditional fossil fuel, which in turn could lead to consumers determining when to use cheaper electricity for things such as car charging by timing their usage accordingly. Electricity prices would be determined competitively by companies considering their own boundaries rather than working through gas. I give notice of our attention to move Amendment 14 to a vote.

--- Later in debate ---

Finally, I turn to Amendment 30 tabled by the noble Lords, Lord Lennie and Lord McNicol. It is my firm belief that this amendment is not necessary. As I have mentioned before, the Bill does not legislate for oil and gas producers. We are imposing the cost-plus revenue limit on some low-carbon electricity generators. This is subject to consultation and the drafting of secondary legislation. The amendment would prejudice the outcome of that consultation and development of secondary legislation, which of course will be debated fully in this House. Therefore, I hope that the noble Lord will feel able not to press his amendment.

[Lord Teverson (LD)]

I thank the Minister for his reply, and beg leave to withdraw the amendment.

Amendment 13 withdrawn.

Energy Prices Bill

Lord Teverson Excerpts

3rd reading
Tuesday 25th October 2022 Lords Chamber

[Lord Lennie (Lab)]

My Lords, briefly, I thank the Minister and his Whip, the noble Baroness, Lady Bloomfield, for their co-operation and hard work during the speedy passage of the Bill. I also thank both the noble Lord, Lord Teverson, on the Liberal Democrat Benches for his knowledge of these matters, and especially my noble friend Lord McNicol, who, while not in his place today, came in at the last minute to support me in the absence of my noble friend Lady Blake. Finally, I thank Milton Brown from the legislative team in the Labour office for keeping us up to date and on message throughout the process. The Bill will now be referred to the other place, and we wish it well in its speedy implementation.

[Lord Teverson (LD)]

My Lords, we on these Benches very much support the Bill, although it might have a few Henry VIII powers and go a little further than it needs to. However, it is clearly absolutely essential for households getting through the winter to come. I very much thank the Minister and the noble Baroness, Lady Bloomfield, for their work from the Government Benches, and all his other officials who have been involved. On our side, I also thank Sarah Pughe from our Whips’ Office. I also thank the Labour Front Bench, and particularly the noble Lord, Lord Lennie, for their co-operation and for the work we have done together. I make one least plea to the Minister, with which I am sure he will agree: it is very important that we manage to deliver the benefits that the Bill gives to those who are off-grid. I know that he and his officials will work hard to ensure that this is the case, although I understand that it will be difficult.

[Lord Whitty (Lab)]

My Lords, while I have no wish to dissent from this unanimity, I think that we are owed an indication from the Minister as to where this fits in with the overall energy policy. We had an Energy Bill before us which is now in limbo and which in part overlaps with the Bill. From the new Secretary of State for BEIS—and indeed from the Minister himself, with the assumption, we hope, that he is still here—we need an early statement on the totality of energy policy, on which this is dealing only with the immediate emergency—profound though it is—facing so many families and businesses. We need to know the totality of the position from the new Administration, so can we have some indication from the Minister as to when we are likely to see that?