Energy Bill [HL]

Lord Whitty Excerpts

Committee stage
Monday 19th December 2022 Grand Committee

[Baroness Bennett of Manor Castle (GP)]

My Lords, I shall speak chiefly to Amendment 162. tabled by the noble Baroness, Lady Worthington, although I take the opportunity to welcome the government amendment on help for micro-businesses and say that it is great to see that happening. The noble Lord, Lord Ravensdale, has already introduced this very clearly; I shall make just one additional point and apologise to the Committee for my absence last week when a number of amendments that I had either tabled or supported were debated. I was in the Chamber with the genetic technology so-called precision breeding Bill. If we have two environment Bills running in exact parallel, it creates some difficulties. I particularly want to thank the noble Baroness, Lady Worthington, for some excellent support for some of my amendments last week.

On Amendment 162, I want to make the point that it is crucial here that we are talking about local networks; what may be appropriate in one place may be inappropriate in another. I am thinking, for example, of areas where air pollution is an issue and the kind of fuel used will be a particular issue in that area. It may, indeed, be appropriate for the regulator to take action on the basis of local conditions as well as of national polities, in terms of either the nature crisis or the climate emergency.

[Lord Whitty (Lab)]

My Lords, noble Lords may have noticed that I extracted my amendments to the second group, when they were originally suggested to be tabled in this group. They relate to the protection of consumers.

I am grateful that the Minister emphasised protection, for both domestic and non-domestic consumers, of the commitments to district heating, decentralised energy and community energy. I am strongly in favour of that move, but I do not think the Bill, as first drafted, or as I read the amendments proposed in the Minister’s group, entirely meet the need to protect consumers of district heating et cetera to the same extent that consumers of other suppliers are protected. I was gratified by some of the Minister’s words this afternoon, but I still do not feel that this combination of what is in the Bill and the Minister’s own amendments will deliver for consumers of district heating the protections, that have been absent for so long, which are supplied via Ofgem to consumers of other forms of electricity supply. I think it will need a bit of tweaking and I shall come to that in the following group.

I do, however, want to register my appreciation for the role of decentralised energy being recognised here. We have some tidying up to do, but I welcome the Government’s commitment to extend support both for consumers in this sector and for the sector itself.

[Lord Lucas (Con)]

My Lords, I wonder whether rounds one to three of the green heat network fund are throwing some light on the potential for expansion in this sector. Are the Government viewing heat networks as something that we will see a lot of, or just little bits and pieces? Coming back to the amendment spoken to by the noble Lord, Lord Ravensdale, if we are going to see a lot, are we seeing green heat sources coming into play in this area? If we are to see a lot of networks, and since the ones I am familiar with, at least, require serious street works, is there a possibility of combining those street works with separating sewage from storm water?

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Moved by

[Lord Whitty]

161B: Clause 166, page 140, line 12, at end insert—
“(3A) The central role of the Regulator in relation to heat networks is to ensure that customers of heat networks have at least equivalent consumer protection to customers of other forms of energy.(3B) The Regulator must have regard to the need for ensuring regulations are supportive of, and compatible with, the United Kingdom’s climate change commitments.”

[Lord Whitty (Lab)]

My Lords, I cannot hope to compete with the Minister, who took six minutes to speak to about 40 amendments, which I think is a record even for this Committee Room. I took out my amendments from the previous group, as I mentioned, because the combination of the Bill at present and the amendments to which the Minister and I just referred does not clearly put the consumer of heat networks on the same basis as the consumer of other forms of energy supply.

I confess that, for part of my career 10 or 12 years ago, I was a little schizophrenic about this, because I was both the honorary president of the CHP Association, which is the predecessor of the Association for Decentralised Energy, and the chair of the statutory energy consumers protection body, which was the National Consumer Council and then Consumer Focus, until the coalition Government unfortunately abolished it. I was both a champion for consumers and for this technology, and I still am. The problem is that the consumers of this technology, the households and commercial or industrial elements that depend on district heating and other forms of heat network, are the least protected of all consumers. While I agree with the amendments the Minister spoke to just now—they are a significant improvement—I do not yet feel that the new wording makes that clear.

My Amendments 161B and 161C propose to put in the Bill, eventually in the Act and the Schedule associated with it, a clear and unequivocal commitment that the regulator’s main and central role will be to ensure that consumers of energy supplied through heat networks have the same rights, protections and regulatory authority as other consumers. If you put that centrally, the role of regulation will be clear. I was gratified when the Government committed to extending regulation in this area and, by and large, I was in favour of the consultative document they put forward. I was slightly more equivocal about giving Ofgem the job, but it is logical that it should be done by Ofgem. My equivocation on that issue was that Ofgem’s record in protecting consumers over the last two or three years has not been that great. Nevertheless, I accept that Ofgem should undertake this role.

The situation at present is that the majority of customers of heat networks are in social housing run by local authorities or organisations subcontracted by local authorities. While there are a lot of private heat networks and some commercial heat networks, the majority are in that category. The consumers are therefore tenants and leaseholders of local authorities on what were once local authority estates. Therefore, they are probably among the lower incomes and have a higher proportion of vulnerable consumers.

This makes it doubly worrying that, for years, there has been no equivalent protection for those who receive their energy from the big six or big eight—whatever it is now—energy suppliers. My amendments are intended to make clear that the main role of the regulator is to protect those consumers. They relate in part to the amendments moved by the Minister relating to the price cap, but they are not just about the price cap. They are also about the price support schemes and the whole range of requirements placed on energy supply companies in relation to customer service for consumers, recognition of the problems of vulnerable consumers in particular and the need to ensure that supplies are continuous for such consumers.

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[Lord Callanan (Con)]

I thank the noble Lord, Lord Whitty, and the noble Baroness, Lady Blake, for their comments and amendments. As I said on the previous group, the Government are committed to introducing protections for heat network consumers that ensure that they receive a fair price and a reliable supply of heat, and are not disadvantaged compared to other consumers. Ensuring that heat network consumers receive comparable protections to gas and electricity consumers is the primary reason for agreeing to the CMA’s recommendation to regulate heat networks.

We also recognise the vital contribution that heat networks will ultimately make in decarbonising heat in buildings. I highlight to the noble Lord that the Bill already provides for the heat networks regulator to prioritise protection of consumers and the decarbonisation of the sector. The Bill provides for Ofgem to be the heat networks regulator in Great Britain, with the Utility Regulator taking on the equivalent role in Northern Ireland.

Schedule 15 to the Bill provides for regulations making provision about the objectives of the regulator. This includes its principal objective to protect the interests of existing and future heat network consumers. This is equivalent to Ofgem’s principal objectives to protect the interests of existing and future gas and electricity consumers. We intend for this principal objective to be set out in the regulations.

Schedule 15 also provides for regulations specifying the interests of existing and future heat network consumers that are to be protected. This includes consumers’ interests in the reduction of greenhouse gas emissions generated by heat networks. Schedule 15 also provides for the introduction of carbon emissions limits on heat networks in England and Northern Ireland. We intend again for this to be provided for in the regulations.

The regulations will also give Ofgem powers to investigate and intervene on networks where prices for consumers appear to be disproportionate compared to systems with similar characteristics or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative, comparable heating system. Ofgem will also be able to set rules and guidance on how heat networks recover their costs through their heat tariffs.

Amendment 161CA tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, is on ensuring the efficiency of existing heat networks. I thank them for highlighting the importance of ensuring that regulation facilitates the improvement of technical standards on heat networks. This will ensure efficient heat networks that provide fair prices and reliable heat to consumers at the same time.

I reassure noble Lords that the Bill, more specifically paragraph 14(3)(d) of Schedule 15, already provides measures for ensuring heat network efficiency. Schedule 15 provides for the introduction of technical standards, which will protect consumers from being supplied by inefficient networks. The regulator’s compliance activity in relation to new and existing heat networks will include work on any standards mandated in authorisation conditions under this power.

I therefore submit that the intentions behind the noble Lords’ amendments are already provided for in the Bill, so I hope that they do not press them.

[Lord Whitty (Lab)]

My Lords, I thank the Minister for that reply. I will clearly want to look at these clauses and the Schedule once all these amendments have been agreed and adopted. I am still not absolutely convinced that all aspects of consumer protection will be covered by this and by Ofgem’s role, but I welcome the Minister’s reassurance.

The key issue is whether all interventions will treat the consumers of district or decentralised heating the same as they would consumers of other forms of energy supply. That also applies to the Government. The Minister referred to the price cap, but the price subsidies or support that we agreed the other week has not found its way to consumers of district heating. That may be a matter of time or it may be that the entity that supplies the heat is obliged to pass that on, but that is not clear at the moment. Things like that need to be tightened up before the final version of the Bill is agreed. I therefore look forward to seeing what the clauses look like following the Minister’s amendments to see whether any further amendments are needed to meet my concerns in this respect. In the meantime, I withdraw my amendment.

Amendment 161B withdrawn.