Energy Bill [HL]

Lord Teverson Excerpts

Report stage
Monday 17th April 2023 Lords Chamber

Moved by

[Lord Teverson]

59: Clause 116, page 102, line 17, at end insert—
“(1A) The person designated under subsection (1) must be a public body with no other roles or interests in the energy sector.”Member’s explanatory statement
This amendment ensures that the ISOP is a public body, not an individual or a private company, and has no conflicting interests.

[Lord Teverson (LD)]

My Lords, Amendment 59 is about the independent systems operator and planner, which we know as the future system operator. I have three amendments in this group—Amendments 59, 61 and 62—and I shall briefly speak to all of them. It is a big gap in the Bill as written at the moment that the so-called independent systems operator and planner is not actually independent in any way, which is why this amendment is down. I also very much support the amendment in the name of the noble Lord, Lord Lennie. For the ISOP to be independent, I believe it is fundamental that it needs to have an independent revenue stream. That is why my Amendment 61 would enable it to raise its own money; it should not come through Ofgem. We all know that the person who pays the piper calls the tune, and the future system operator needs to be independent of Ofgem. Lastly, Amendment 59 would ensure that the ISOP is a public body. I beg to move.

[Lord Lennie (Lab)]

My Lords, my understanding is that the Minister will confirm the Government’s support for an independent ISOP, as suggested by the noble Lord, Lord Teverson, and this being the case, we know no longer need to divide the House on our amendments. So, rather than listening to me putting forward the argument in favour of achieving this, I think we would be better served to listen to the Minister in his reasoning for an independent ISOP: I thank him for his time over the weekend, when we reached this position.

[The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)]

Let me first thank all noble Lords for their amendments, and I thank the noble Lord, Lord Lennie, for the time he gave to discussing this matter. As always, there were valuable contributions from all parts of the House.

On the details of the amendments, Amendment 60, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, seeks to establish an industry-led advisory board for the ISOP. In the original consultation, the respondents strongly indicated that the body should be independent of energy sector interests, and I think that is a view shared by the Opposition. The Government therefore remain concerned that inserting in legislation a formal oversight role, as is being suggested, will place decision-making back in the hands of the energy sector and go against the reasons and mechanism for creating an independent ISOP in the first place. This could make the ISOP risk-averse or unwilling to take action that is potentially challenging to market participants but could be on the side of consumers, even if that action might be beneficial to the system itself.

We are therefore concerned that, rather than enhancing independence, members of such an advisory board would likely hold various energy sector conflicts. There are many ways this could crystallise, including resistance to systemic reform, more strident advice in favour of compensation for energy sector participants, or incumbent bias, for instance seeking to frustrate new market entrants which could stifle the innovation that I think everyone, in all parts of the House, is agreed that we need to reach net zero.

Establishing an industry-led advisory board for the ISOP would be similar to establishing one for, for instance, the Climate Change Committee—an organisation which, in our view, also needs to remain independent of industry interests. I hope noble Lords would agree that we need genuine, independent, expert thinking, rather than vested interests. Thankfully, this amendment is not required to ensure board independence; the Government intend to require that a number of sufficiently independent directors—or SIDs, to use the acronym—sit on the ISOP’s board. A SID is a board member who meets certain criteria to ensure that, as well as being skilled, knowledgeable and experienced, they are impartial, with restrictions including on certain shareholdings in the energy industry. Requirements in the ISOP’s licence will set a minimum number of SIDs to ensure that the ISOP’s board has strong representation from those outside the ISOP and is unconflicted by the interests of the energy industry.

To ensure effective scrutiny of the appointment of the ISOP’s chair, we are also asking the Office of the Commissioner for Public Appointments and the new departmental Select Committee, once established, to conduct pre-appointment scrutiny. Energy sector experts will have opportunities to input to the ISOP’s work, of course. For instance, the system operator’s business plan submissions, assessed by Ofgem, will continue to be open to consultation with market participants, including members of the specific industry forums mentioned in this amendment. Finally, through its price control process, Ofgem will ensure that the FSO is fully resourced to fulfil its objectives and obligations, including the funding of its statutory duties towards consumers, energy security and net zero.

Turning to Amendments 59 and 62, tabled by the noble Lord, Lord Teverson, again we agree with the sentiment of the noble Lord’s amendments, and the Government remain resolute that the ISOP shall be an independent public body. We continue to act to make this so. However, it is critical that the ISOP remains a dynamic organisation capable of adapting and evolving to the future conditions of the energy sector. I therefore hope the noble Lord will agree with me that it is preferable not to constrain the ISOP pre-emptively in legislation at this fairly early stage but to maintain some flexibility. With the rapid deployment expected in the energy sector, reasonable circumstances may arise in which the ISOP is well placed to take on some future energy sector role or interest.

Regarding the specifics of Amendment 62, I believe there are already significant controls and limits upon the Secretary of State in acting as the sole shareholder. These will include limits in the framework agreement, which we will of course make public. These controls will ensure that the ISOP’s operational independence is protected.

Legislating for the ISOP to “be independent” does not, in my view, appear to offer a material benefit beyond the controls already established in Part 4 of the Bill and the framework documents, but it risks preventing the intended corporate composition of the ISOP, thereby undermining its effectiveness.

Finally, on Amendment 61, also tabled by the noble Lord, Lord Teverson, the Government agree that it will be important to ensure that the ISOP is fully resourced to fulfil the objectives and obligations set out in its licence. In our view, the most effective funding mechanism to achieve this and realise our vision for an independent ISOP is for it to be funded by consumers through price control arrangements, much like the current gas and electricity system operators are today.

Levies placed on licensed bodies can be expected to filter through to consumers. However, we are concerned that the requirement to establish an audit board risks duplication with the current well-understood and transparent regulatory model established under Ofgem. Without a price control process run by the regulator, there is also a risk of poor consumer value for money. As with other regulated bodies in this sector, the ISOP will have the operational freedom it needs to manage and organise itself to effectively deliver its roles and objectives. We also intend the ISOP to sit outside the regime of Cabinet Office controls on spending, which bodies funded by taxes and levies are required to operate under.

With the explanations and reassurances that I have been able to provide, I hope that noble Lords will agree not to press their amendments.

[Lord Teverson (LD)]

My Lords, I am very encouraged by the Minister’s response on the control of the board and the ISOP. I am disappointed about the funding flows, but I guess that it will work out as it works out. I think that is unfortunate, but I have no intention of pressing the matter. I beg leave to withdraw my amendment.

Amendment 59 withdrawn.

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Moved by

[Lord Teverson]

65: Clause 159, page 131, line 23, at end insert—
“(1A) Those standard conditions must contain provision by which the holder of the MPI licence will contract with the relevant transmission licensee for the connection of offshore distribution networks, generating stations or offshore installations to the multi-purpose interconnector.”Member’s explanatory statement
This amendment seeks to clarify whether the regime for MPI licences will operate in a similar way to the Offshore Electricity Transmission regime in that generation and demand users will have contracts with the system operator, who will in turn enter into back-to-back arrangements with the MPI licensee.

[Lord Teverson (LD)]

My Lords, I will be brief on this group, but I believe these are important issues which we did not reach in Committee. I speak first to Amendments 65, 66 and 67 on multipurpose connectors.

Multipurpose connectors are intended to provide links between the electricity transmission systems in the UK and other jurisdictions while simultaneously connecting new offshore generation, such as offshore wind—a key part of our energy strategy—and demand, such as oil and gas installations. Ofgem is bringing together an interim regulatory framework, but I believe that there is a lack of flexibility. There is a potential difficulty in the existing interconnector/offshore transmission operator licensee being able to carry out its functions as an MPI—that is, a multipurpose connector—licensee. These amendments aim to clarify the situation.

Amendments 125 and 129 in this group are about the decarbonisation of offshore oil and gas installations. In the North Sea Transition Deal, published in March 2021, the UK Government committed to reduce greenhouse gas emissions from North Sea oil and gas activities by 50% from 2018 levels by 2030—I very much welcome these targets—and, of course, to achieve net zero for the basin by 2050. The electrification of offshore production facilities is the route to achieving this. It is generally agreed that that is the way to do it.

The annual volume of carbon dioxide-equivalent greenhouse gas emissions produced by offshore oil and gas installations is some 10 million tonnes, which is roughly a tenth of the total emissions from UK energy supply. It is far from insignificant, but there is a narrowing window of opportunity to achieve these targets due to the life of these installations and the constant decommissioning programme. They just stop being economic in terms of those investments. We need action now, but there are a number of obstacles: uncertainty around how offshore networks will be treated by regulators, questions around the offshore transmission owner and well-known issues around connections to the UK grid—hence these amendments.

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In light of the reassurances that I have been able to provide, I hope that the noble Lord, Lord Teverson, will withdraw his amendment, and that other noble Lords will feel able to not move theirs.

[Lord Teverson (LD)]

My Lords, I thank the Minister for his long and detailed response to my amendments. One always knows in this House that you are in big trouble when Ministers start talking about unintended consequences of amendments, so I accept that. Having said that, I am mortified that we cannot, at this stage, change the name of the Oil and Gas Authority; just a promise of a Third Reading amendment would have made my day, but there we are. It is obviously far too difficult. But I take encouragement from the Minister; I think he suggested that that is a work in progress and will happen at some time. In the meantime, I beg leave to withdraw my amendment.

Amendment 65 withdrawn.

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That is all I am asking. I suspect that the Minister does not want to incorporate it in the Bill but it would be nice if he could give me an indication that, together with the regulator, the Government are at least thinking of better ways to ensure a more socially just structure of tariffs in this country. I beg to move.

[Lord Teverson (LD)]

My Lords, I was pleased to add my name to the amendment from the noble Lord, Lord Whitty. There is no easy answer to the question of a social tariff—all solutions to fuel poverty have downsides—but the industry feels that this is the direction of movement and consumer groups agree, so I will be interested to hear the Minister’s response. I have also tabled two amendments in this group: Amendments 70 and 71 about prepayment meters. This is a particularly important area to me. I will not take up the House’s time by going through the arguments again, but I would be interested to hear from the Minister where the Government stand now on prepayment meters and self-disconnection.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I have attached my name to a number of amendments in this group in the names of the noble Lords, Lord Whitty and Lord Teverson. The arguments on prepayment meters put by the noble Lord, Lord Teverson, are very clear; we have seen that all over the media.

The noble Lord, Lord Whitty, referred to the fact that this is a long-term issue, but it is worth highlighting that, since we debated this in Committee, the Government’s own figures have come out. They show that the fuel poverty level in the UK increased to 13.4% over the course of 2022 and predict that it will reach 14.4% by 2024.

Of course, these figures use the highly questioned government definition of fuel poverty, which does not allow for anyone living in a home above D classification to be classed as fuel poor even if they simply cannot afford to heat that home. According to the National Energy Action definition of fuel poverty—households spending more than 10% of their income after housing costs on energy bills—there were 7.39 million households in that condition in 2022, and the NEA estimates that this year, after April, 8.4 million people will be in households in fuel poverty.

These measures would be highly targeted to address the poorest. They are simply common sense, enabling people to live and be healthy in our society.

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[Baroness Meacher (CB)]

My Lords, I will not take the time of the House to repeat comments that have already been made. The noble Baroness, Lady Boycott, and others have made a very powerful case for these amendments. It is ludicrous for us not to be enabling community energy production when this does not involve a subsidy and when it could create additional energy sufficient for something like the 2.2 million homes mentioned by the noble Baroness, Lady Boycott. This is a completely neglected area; it can be resolved as set out in these amendments in a straightforward way. The main thing is that these community energy projects need to be able to sell their energy to big suppliers in the locality—those with more than 150,000 customers was the figure quoted, I think. So there is very strong support for these amendments and I hope the Minister will be able to accept them. I cannot see any reason why not: it is not going to cost the Government anything.

[Lord Teverson (LD)]

My Lords, from these Benches I welcome particularly the amendments in the name of the noble Baroness, Lady Boycott. I will not detain the House except to say that it is quite clear that community schemes have not operated effectively for many years. I should declare that I am an insignificant shareholder in a local community scheme in my own home area, which was set up under the feed-in tariffs. The schemes as put forward are not a kind of feed-in tariff regime: they are really looking for stability of price and are not around subsidy. I just say to the Minister that the Government’s overall target is decarbonisation of the grid by 2035: let communities play a big part in that, because one thing that is really important here is that community schemes allow for communities, individuals, households, families and small businesses to participate in the decarbonisation of our economy and net zero. They can be a part of it and that is why these amendments are so important.

On the amendment in the name of the noble Lord, Lord Ravensdale, it is indeed very important that local authorities are involved and are movers in this area. All I can say is that I have to learn from him: he has the ear of the Government and the Minister far more than I do, and perhaps I could have some lessons afterwards about how to be successful in getting amendments into Bills.

[Baroness Blake of Leeds (Lab)]

My Lords, I declare my interest as a vice-president of the Local Government Association. It will come as no surprise to Members of the House that I support all these amendments, particularly Amendment 94 in the name of the noble Lord, Lord Ravensdale. Going by my personal experience, not giving a broader role to local authorities is such a missed opportunity and I cannot understand why these amendments would not be supported, particularly since it is, in all honesty, such a mild request: better definition of local authorities’ role; and asking for guidance, which is a perpetual demand from local authorities, I have to say, in trying to move things forward. As we know, other key reports and reviews have recognised just how important it is to get local buy-in and to get local stakeholders involved.

I turn to the amendments in the name of the noble Baroness, Lady Boycott, and signed by others. It is essential that we bring these elements together. What we are talking about, without repeating the technical issues that have been raised so powerfully today, is that we need to aim to have a framework that will support the growth of community and smaller-scale energy schemes and also provide regular reporting so that everyone knows how things are progressing. I have to say that all we are asking for is the following of an evidence-based approach. We can look at the success of other, related schemes in these areas that have been successfully led by local authorities. These include the rollout of electric vehicles, with local authorities leading by example in changing their fleets to electricity. District heating is another example where, when you have very strong local buy-in, the success moves forward. What we are asking for here is the ability to inform, shape and enable key aspects to deliver energy decarbonisation.

I believe very firmly in involving local stakeholders from the beginning; they are far more likely to come on board with schemes that might have aspects that they find work against their interests if they understand and are included in the bigger picture. Many people will make compromises when they understand the greater good, and the opportunity has been highlighted over the past year by the dramatic increase in energy prices and the risk of energy scarcity. I think the landscape has changed in this regard. Let us give confidence to local people and communities by developing the framework for the growth of communities and smaller-scale energy schemes. It is regrettable that more progress has not been made so far. The role of Ofgem in this, giving clear methodology and quality standards, is essential and will give the credibility that is needed, as the noble Baroness, Lady Boycott, so eloquently pointed out.

Through the involvement of local communities, we are asking for a more effective and better targeted delivery of national priorities; and we all know that we need more determination to deliver on the ground. I hope we will see some movement in this area and can only echo other comments: if we fail to make progress, this is such wasted potential, and I hope we will hear some positive comments with regard to these amendments.

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[Baroness Bennett of Manor Castle (GP)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Sheehan, and to offer the strongest possible Green support for her Amendment 124, which would prohibit the flaring and venting of hydrocarbons other than in an emergency. The case has already been very powerfully made, but I will add that this has been a recommendation of the Commons Environmental Audit Committee and what is known as the Skidmore report—the Mission Zero independent review. It is something that other nations are well in advance of us on—a point that forms something of a theme for my remarks.

I also support for Amendment 131, which we have not heard fully set out yet, on no new coal mines. It has broad cross-party and non-party support, and it is obvious that we cannot have new coal.

I shall speak chiefly to my Amendment 138B, which goes further. Very simply, it would prohibit new oil, gas and coal extraction. I tabled a similar amendment in Committee and will not go over the same ground, but I want to briefly make three points. First, in May 2021, the International Energy Agency—not known as a group of radial greenies—called clearly for no new oil, gas or coal. Therefore, my amendment would deliver what the International Energy Agency said had to be done in 2021. We are now in 2023.

Since we were in Committee, we have seen increasing momentum behind the fossil fuel non-proliferation treaty, one element of which is no new oil, gas or coal. Six Pacific nations have issued a joint call to the world to say that this has to happen. The Prime Minister of Vanuatu said that polluting industries would not break from their “business as usual” behaviour without being forced. He said that we had to “explicitly stop the expansion” of production.

We often hear about the Government’s desire to be world-leading. It is actually this week, on 19 April, that the state of California is considering a resolution to formally endorse the fossil fuel non-proliferation treaty, which would deliver no new oil, gas or coal. It is going to have a Senate hearing on 19 April, introduced by the Senate Majority Whip, Senator Lena Gonzalez, and co-sponsored by the Indigenous Environmental Network. If the Government really want to be world-leading, they are going to have to catch up.

[Lord Teverson (LD)]

My Lords, I commend the noble Baroness, Lady McIntosh of Pickering, for emphasising the mitigation hierarchy in her amendment and for her speech. It is something that is really important to take notice of offshore. I was pleased to add my name to the amendment of my noble friend Lady Sheehan, and I have great sympathy with the amendment from the noble Baroness, Lady Bennett. However, I will speak primarily to Amendment 131.

I guess that if this Bill had come before this House three years ago, I would not have even contemplated putting an amendment down about no more coal, because it would have been totally and absolutely obvious that it would be a really stupid thing for any nation—let alone the United Kingdom—to do. However, we are in the situation where we have the Government saying that a coalmine in Cumbria should actually go ahead. I put this amendment down because I now wonder, if we have one, what else could happen. It is not specifically about Cumbria, but Cumbria is important.

Let us look at Cumbria for a moment. First, the issue does not revolve just around the production of coking coal for steel. That is estimated to be only 15% of production. The other 85% is expected to be exported. Of course, once that coal leaves our shores, we have absolutely no control over it; it is a commercial decision. We have no control over what that coal is used for, and almost certainly it is going to be used for energy and power generation. Even if we take that 15%, which is supposedly for coking coal, we have a situation where the UK steel industry is actually moving away from carbon-intensive methods into green steel. At the moment, we are some way behind our friends and colleagues in the European Union, in that they have some 38 green steel plants under plan and 10 operating at the moment, all mainly green hydrogen produced by electrolysis. The one proposed in the UK is blue hydrogen with carbon capture and storage, but that is the future. The future is not steel produced by coking coal.

So, in a way, the Cumbria mine project should be unacceptable to us, yet Michael Gove, who I had huge respect for when he was Defra Secretary of State and who introduced a huge number of important environmental improvements and plans that are still echoing beyond his tenure in that role, in December last year—only five months ago—approved the plan for that coal mine. Rather cynically, he approved it up to 2049, one year before we have to have net zero in the United Kingdom.

One of the main reasons I have tabled this amendment, apart from the fact that I would not have thought it even possible that the United Kingdom would contemplate opening a new coal mine, is our international reputation. Of course, as Members will remember, we were the president of COP 26. We had a very successful conference in Glasgow and most of us—all of us, probably—congratulated Alok Sharma on the work he did as president of COP 26. During that conference, the UK Government put out a press release about their own success. This was in November 2021, only some 18 months ago, and it heralds:

“The end of coal—the single biggest contributor to climate change—is in sight thanks to the UK securing a 190-strong coalition of countries and organisations at COP26, with countries such as Indonesia, South Korea, Poland, Vietnam, and Chile announcing clear commitments to phase out coal power”.


The end of coal; that is the message.

The BEIS Minister at the time, someone called Kwasi Kwarteng—noble Lords may have heard of him—said:

“Today marks a milestone moment in our global effort to tackle climate change as nations from all corners of the world unite in Glasgow to declare that coal has no part to play in our future power generation. Spearheaded by the UK’s COP26 Presidency, today’s ambitious commitments made by our international partners demonstrate that the end of coal is in sight. The world is moving in the right direction, standing ready to seal coal’s fate and embrace the environmental and economic benefits of building a future that is powered by clean energy”.


I applaud that statement. It is strong, determined and absolutely to the point. Yet we are about to have a coal mine that will produce coal not just for an outdated steel technology but to be used for power generation.

I am very proud of Britain’s reputation on climate change. On my Benches and others we have criticised many aspects, but we have shown, over coalition Governments, Labour Governments and even the present Conservative Government, that we have moved forward—further, in many ways, than our fellow G7 countries. That is why it is absolutely wrong that we should trash that reputation by one decision to open a new UK coal mine. Who knows? If that happens once, it can happen again. That is why this amendment is so important.

[Lord Deben (Con)]

My Lords, first, I have to say to the last speaker that I did not like that word “even”; this Government have introduced the highest targets of any country in the world. They have led the world in the most remarkable way and we should thank them for it—but that makes the argument against coal mines even stronger.

The Climate Change Committee is very careful not to overstep its mark. Its job is to advise on alternative methods and on the aims that we need to set the targets. Very rarely does it say that a particular measure is unacceptable. Indeed, in dealing with the question of new oil and gas, we have been very clear that the Government have to take into account the geopolitical position: you cannot just talk about the whole issue of the environment, because we are at war in Ukraine. We have a country determined to squeeze freedom out of Europe. We are concerned in all sorts of areas and we have to make very difficult decisions, so I hope my noble friend will remember how careful the Climate Change Committee has been in looking at these issues.

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Moved by

[Lord Teverson]

131: After Clause 264, insert the following new Clause—
“Prohibition of new coal mines(1) Within six months of the day on which this Act is passed, the Secretary of State must by regulations prohibit the opening of new coal mines and the licensing of new coal mines by the Coal Authority or its successors.(2) Regulations under this section are subject to the affirmative procedure.”Member's explanatory statement
This amendment will prevent the opening of new coal mines in England.

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[Lord Teverson (LD)]

My Lords, I will just say to the noble Lord, Lord Deben—whose speech I very much appreciated—that, in the first group on the levelling-up Bill tomorrow, I have an amendment to include “net zero” in the planning organisation.

I wish to test the opinion of the House on Amendment 131.

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[Lord Ravensdale (CB)]

My Lords, I want to offer a few words of support for the amendment from the noble Lord, Lord Berkeley. It is something that the Government should take very seriously if it is to be used in a very specific and limited way for off-grid properties—the key point being the feedstock availability, which needs to be understood in more detail.

On the link with sustainable aviation fuel that the noble Lord, Lord Berkeley, mentioned, there is potentially an important counter-cyclical benefit here, in that jet fuel is dominant in the summer months and heating oil is dominant in the winter months. They are essentially the same fuel, so there is potentially a good economic fit between those two cases, and the relevant departments—DESNZ and DfT—should work together on that.

I would suggest some potential improvements to the amendment, such as limiting it to those off-grid properties that already use heating oil and specifically stating in the amendment that this is only for recycled fuels, to eliminate the unintended consequences of biofuels being eligible. Overall, however, this is something that the Government should take seriously.

[Lord Teverson (LD)]

My Lords, I certainly echo the question that the noble Baroness asked about the timing of the boiler scheme. There has been a big debate in the past on the use of frying oil, and getting the fiscal measures and the subsidy right so that it can be used as a transport fuel. Those arguments went on for a long time. However, I believe that there needs to be fiscal-incentive neutrality between the different types of renewable fuels, whether they are used within transport or indeed off grid.

[Lord Lennie (Lab)]

My Lords, I will briefly thank my noble friend Lord Berkeley for this amendment, which is asking the Government to introduce renewable liquid heating fuel obligations that mirror the renewable transport fuel obligations as a choice available for decarbonising heating. I do not know—perhaps the Government know—whether there is any reason why they cannot accept this proposal, given that these fuels can be produced and distributed using industrial facilities that seem to already exist, and in turn using local raw materials, making it possible to diversify the energy base of the country in order to keep moving forward and achieve energy independence. Would it work? If so, why not give it the go-ahead?