Draft Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026
Debate between Polly Billington and Graham Stuart(3 days, 17 hours ago)
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Ms Polly Billington)
I beg to move,
That the Committee has considered the draft Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026.
It is a pleasure to serve under your chairmanship, Sir Desmond. In the autumn Budget, the Government acted to reduce energy costs to benefit all households with a domestic energy contract. We did that by closing the energy company obligation scheme to new costs on bills and by moving 75% of the domestic cost of the renewables obligation to the Exchequer. Those decisions are already making a real difference. From April 2026, they took an average of £150 in costs off household energy bills, and they continue to keep bills lower than they would otherwise be.
The renewables obligation exists to support renewable electricity generation through a system of tradeable certificates. The scheme is closed to new applications, and the first generators will come off the scheme from April 2027; the scheme will close finally in 2037.
The scheme has been instrumental in building the UK’s renewable energy sector. It supports about 35 GW of generation capacity and about 30% of total UK electricity generation. The core of the renewables obligation scheme is a process in which electricity suppliers purchase certificates from renewables generators. Previously, suppliers recovered all the costs of complying with the obligations from consumers via their electricity bills, with Ofgem reflecting those costs through the price cap.
From 1 April, the Government have instead provided grant funding to electricity suppliers to cover 75% of the domestic share of the costs in Great Britain. We have also taken steps to ensure that those savings are passed on: for customers on standard variable tariffs, Ofgem has factored the lower policy costs into the price cap; and for customers on other domestic tariffs, including fixed tariffs, the Government issued a legally binding direction requiring suppliers to pass through the savings in full.
The latest price cap illustrates why that action matters. On 26 August, Ofgem announced that the cap for 1 October to 31 December will increase by 4% to £1,723 for a typical household, driven by ongoing wholesale price volatility as a result of the war in the middle east. Ofgem has been clear that the increase is likely to be felt primarily in gas bills, with electricity bills remaining broadly flat. Without the action we took at the Budget, the cap would be significantly higher still.
The draft regulations are concerned with the legal basis for continuing to deliver the bill reduction measures. Section 13 of the Energy Prices Act 2022 provides the power we are using to take such steps to reduce people’s bills, but the power in section 13 is time-limited and may be extended only by six months at a time. Earlier this year, Parliament approved regulations extending the power from 25 April to 25 October 2026. The regulations before the Committee extend that time limit again, from 25 October to 25 April 2027, so that the policy can continue without interruption.
Graham Stuart (Beverley and Holderness) (Con)
Can the Minister confirm whether the Government’s intent is to maintain this—albeit on a six-month rolling basis—for the entirety of this Parliament?
Ms Billington
To be clear, we will do this while we need to. As soon as parliamentary time allows, we will change the law so that we do not need to continue to extend in this way.
The regulations do not give the Secretary of State any new powers. They simply extend the period in which the existing power may be used. I assure hon. Members that the Department is working on primary legislation to provide a more permanent solution when parliamentary time allows.
The position is slightly different in Northern Ireland, where energy costs are a transferred matter for the Executive, and the Northern Ireland renewables obligation forms a smaller cost on energy bills. The Department has been supporting colleagues in Northern Ireland as they develop a comparable offer to the policy in Great Britain. Following a request from the Northern Ireland Minister for the Economy, separate regulations came into force on 20 June to enable the Northern Ireland Executive to deliver their comparable offer.
The regulations are a straightforward extension of an existing time-limited power. At a time when international events continue to put pressure on wholesale energy markets, it is vital that the Government can continue to deliver the bill reductions announced in the Budget while work progresses on a longer-term legislative solution. I commend the regulations to the Committee.
Ms Billington
I thank the hon. Gentleman for his question. I am happy to write him about the specifics of that.
Ms Billington
I thank hon. Members for their contributions, and I will turn briefly to the points raised. The No. 1 priority of this Government is to tackle the cost of living crisis that people face. The Government acted at last year’s Budget by taking an average £150 of costs off energy bills. Those decisions are now factored into bills for the years to come. That decision was taken at the autumn Budget 2025 before the conflict in the middle east and the subsequent increase in wholesale energy prices. As a result, households are better protected from those increases than they would otherwise have been.
The rise in the price cap announced by Ofgem will be deeply concerning news for families. We will continue to monitor the situation ahead of the winter and plan for all contingencies. I recognise that some would like us to go further in immediately reducing bills in response to recent events. One of the first steps that the new Prime Minister took was to cut VAT on electricity bills. Without that intervention, the price cap figure would have been around £45 higher than announced. Although the price cap will increase by 4% on 1 October, driven by ongoing wholesale price volatility as a direct consequence of the events in the middle east, it would have been considerably higher still without the ongoing effects of moving the renewables obligation to the Exchequer, which continues to suppress bills.
Where impacts have been felt by those outside the energy price cap, we have acted, with £53 million of support via the crisis and resilience fund for vulnerable heating oil customers announced in March. I thank my hon. Friend the Member for South West Norfolk for his question about the crisis and resilience fund. I understand people’s concern about whether they should apply. I urge anyone who relies on heating oil who has any concerns about their ability to afford to keep their home warm this winter to apply to the fund, and I will be keen to ensure that local authorities recognise their responsibilities when it comes to disbursing funds accordingly.
Graham Stuart
The Minister is being most generous in giving way. There was a clear manifesto promise to reduce energy bills by £300. Is that manifesto promise still extant? Is she intent on delivering it, and if so, how and when?
Ms Billington
I thank the right hon. Gentleman for his intervention, and I am sure we will continue to have conversations about this. Our manifesto commitment is absolutely to make sure that we have lower energy bills in the future. We also have to be honest about how we manage external shocks to our system and make sure that we are protecting customers and consumers from those. That is one reason why we have the clean power plan, and why we are looking to reform the market over time so that we are not exposed to the kinds of global shocks that push up prices, as we have seen recently.
Graham Stuart
The Minister is being most generous again. I did not ask her about protecting consumers from energy price shocks; I asked about a clear, unequivocal manifesto pledge to reduce household energy bills by £300. She, like her predecessors, refuses to address it directly. It was a clear promise. She and her colleagues were elected on the basis of delivering that, and this Government are not delivering it. They are delivering higher bills at a time when people are struggling with household finances. Those people demand and expect that Ministers in the Government account for that promise and tell us whether it will be delivered, and if so, how.
Ms Billington
I thank the right hon. Gentleman for his intervention. It is very clear. As I said, we absolutely stand by our commitment. The previous Energy Secretary, my right hon. Friend the Member for Doncaster North (Ed Miliband), said:
“Bills are too high and we stand by our promise to get bills down by up to £300 by 2030.”
We have already taken £150 off bills as a consequence of the decisions made in the previous Budget. The new Prime Minister has announced a £45 reduction on average across an energy bill because of the reduction in VAT. The independent Resolution Foundation found that across 2026 as a whole, the typical energy bill is now expected to be more than £200 lower in real terms than in 2024 before the conflict in the middle east began.
I understand that the right hon. Member for Beverley and Holderness knows a lot about the energy system and I respect his understanding, but when there are global shocks like there are, we have to do everything we can as a Government to protect consumers from those global shocks. That includes the short term with the efforts we are putting in now, and the long term in reforming the market. I look forward to seeing him supporting our reform of that market in order to be able to protect consumers in the future.
The UK has a diverse and resilient energy system—indeed, one that the right hon. Gentleman oversaw for some time—and we will of course continue to monitor the situation in the middle east closely. I assure colleagues that contingency planning is taking place for every eventuality to ensure that the Government can be responsive and responsible. It is important to understand that we need a principled reform to shift the balance of levy costs from the bill to the Exchequer, because we need to make sure that that is a fairer way of dealing with the cost of a shift to a cleaner and more resilient energy system. The reason we have given for not abolishing the renewables obligation, which is a suggestion from the Conservatives, is that it would significantly impact on investor confidence and energy security. There is a risk of there being no certainty that 25,000 renewable energy projects would continue generating without that subsidy. I am sure that His Majesty’s Opposition would not want a set of policy proposals that would threaten the security of our energy system in that way.
The draft regulations extend a time limit on essential legal powers that will enable us to take action to reduce people’s energy bills. While simple in themselves, the regulations support the reduction of energy bills, which is a key part of the Government’s focus on the cost of living.
Question put and agreed to.