Energy Prices Bill

Peter Aldous Excerpts

Committee stage
Monday 17th October 2022 Commons Chamber

[The Second Deputy Chairman]

I call Peter Aldous.

[Peter Aldous (Waveney) (Con)]

I am largely supportive of the Bill, as there is an urgent need for assistance to be delivered at speed to hard-pressed families and businesses, but it is important to avoid any unintended negative consequences for other key Government objectives, in particular energy security, the transition to net zero and the full deployment of renewables and low-carbon forms of energy production.

My constituents urgently need the support that the Bill will provide, but to regenerate the local economy and create long-term, well-paid jobs, we need investment in offshore wind, nuclear and hydrogen. There are exciting opportunities in the sector throughout east Anglia, and specifically Waveney and Lowestoft, although certain clauses in the Bill raise worries that such investment could be imperilled. I hope that the Minister will be able to allay that unease. The Government are not pursuing a windfall tax on renewables and nuclear generators because they are worried that it would deter investment. Some of the mechanisms proposed in the Bill could have a similar negative impact, and it is important that further clarification is provided quickly. I will briefly outline three specific concerns.

Clause 16, along with schedule 6, introduces the cost-plus revenue limit, which is a cap on the revenue of low-carbon energy generation. There is a worry that this mechanism could penalise investment in clean, cheap and low-carbon generation. To avoid that, there is a need for a reinvestment allowance to channel investment into low-carbon projects, which are needed to meet our net zero and energy security targets, and which will also provide the long-term route map out of the cost of living crisis.

Clause 21 enables the Secretary of State to modify the licences under which energy companies operate. Currently, the regulator Ofgem determines licence conditions. This is an arrangement that works well and has the confidence of investors. Further clarification is required as to the Government’s intentions, and consideration should be given to providing a definitive timeframe through a sunset clause for how long this provision will be in place.

Clause 19 sets out the arrangements for passing on the energy price support from generators to end users. There is a concern that the Bill as drafted does not properly take into account the fact that generators do not all operate in the same way and that they incur differing operational costs.

In conclusion, I hope the Minister can allay these concerns. I urge the Government to liaise and consult with all relevant stakeholders, including energy companies and civil society organisations, to avoid these unintended consequences, which could imperil energy security, decarbonisation and economic regeneration in coastal communities such as Waveney.

[Alan Brown]

It is a pleasure to serve under your chairmanship, Mr Evans, and to follow the hon. Member for Waveney (Peter Aldous). I very much expect that the Minister will not listen too much to my suggestions, but I hope he will listen to at least some of hon. Gentleman’s suggestions for making sure that we do not disincentivise investment in renewables and for amending some of these overreaching powers.

I would like to put on record my thanks to the Chairman of Ways and Means for selecting our manuscript amendment, new clause 18, which was obviously tabled in response to the Chancellor’s shock announcement this morning at 11 am that the UK Government’s flagship energy price guarantee policy, which we were told would last for two years, will now end in April 2023. People are already worried about the cost of living and the cost of the energy crisis, even with the support currently pledged, so many millions more will now be even more worried.

When the Chancellor gave his statement to the House later, he committed to at least some form of Treasury review in a modified scheme to protect the most vulnerable, but that in no way negates the merit of new clause 18. Given the mistakes and the recent track record of this shambles of a Government, it is surely in the House’s interest to set the parameters of a review and the considerations required for a new scheme post April 2023. The shadow Minister said that 28 days is too short a timeframe. I would argue that it is more than time enough for a Secretary of State to report back to Parliament and try to give households some certainty going forward.

--- Later in debate ---

[Graham Stuart]

There are many statutes that include the word “may” from which we can take it that the Government will do what is set out. I am pleased to say that it is absolutely our intention to ensure that those off grid are treated comparably to those on grid.

[Peter Aldous]

The past 10 years have been remarkably successful, with the offshore wind industry and the Government working hand in hand. The industry has raised genuine concerns, which I briefly outlined in relation to clauses 16, 19 and 21, about the direction of that relationship and how it is being imperilled. Will the Minister agree to meet the industry and address those concerns as the Bill progresses?

[Graham Stuart]

As my hon. Friend would doubtless expect, I regularly meet energy companies. I have absolute confidence. One of my biggest concerns when we were looking at the package was to ensure that there are no disincentives to investment in renewables. It is noticeable that the EU has come up with a scheme. We are talking about prices linked to gas that are completely outwith any of the expectations of those who run long-standing nuclear and other low-carbon production. This is an intervention that deals with prices well beyond any prior expectation. It will therefore not disincentivise or undermine any existing business plans.

The contracts for difference that this Government brought in are now being mimicked around the world. In the last auction, 11 GW came in: so successful was it that we are now moving to annual auctions and CFDs. It is also worth saying, on the record, that renewables obligation certificates and other support mechanisms are being entirely honoured; this measure is merely about the spot price, which is excessive. We will come forward with further proposals in due course and will consult with the industry and others to ensure that we act in a way that does not disincentivise investment.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 30 ordered to stand part of the Bill.

New Clause 3

Report on additional expenditure treated as incurred for purposes of section 1 of the Energy (Oil and Gas) Profits Levy Act 2022

“(1) The Secretary of State must, within six months of the date of Royal Assent to this Act, publish and lay before Parliament a report on the effect of reducing the amount of the allowance under section 2(3) of the Energy (Oil and Gas) Profits Levy Act from 80% to 5%.

(2) The Report must set out projections of the effect of the reduction set out in subsection (1) on domestic and non-domestic energy bills.”—(Dr Whitehead.)

This new clause requires the Secretary of State to produce a report assessing the impact of reducing the investment allowance for oil and gas companies as set out in the Energy (Oil and Gas) Profits Levy Act from 80% to 5%, and in particular to assess such a reduction’s impact on domestic and non-domestic bills.

Brought up, and read the First time.

Question put, That the clause be read a Second time.