Energy Prices Bill

Baroness Winterton of Doncaster Excerpts

2nd reading
Monday 17th October 2022 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Colleagues will know that this debate has to finish at 7.30 pm. After the shadow Secretary of State has spoken, I will put on a three-minute time limit. We will then go to the SNP. I will try to get as many people in as possible, but we will not, realistically, be able to have wind-ups. I therefore suggest that people who do not get in perhaps prepare for what they might to like to contribute in Committee.

--- Later in debate ---

[John Redwood (Wokingham) (Con)]

I welcome the Government’s announcement today that this scheme should be time-limited to six months and that a different scheme should be developed against the possibility that energy prices remain very high for the months thereafter. I do not think that we can go on indefinitely at the rate of the cost of this particular scheme over the winter. If this continues, we need to target the support much more clearly on the many people and families in this country who could not afford the bills otherwise and leave those who have rather more money and are using rather more energy on luxuries to pay more of that for themselves. We have time to sort out a scheme that we can target better. I am sure that this Committee, and the dialogue that will continue, will make sure, through pressure from Back Benchers and Front Benchers, that we do not leave anybody out. It is very important that everybody has proper support one way or another so that they can afford their energy bills this winter and beyond.

I am also sure that the long-term solution is more domestic energy. We cannot carry on relying on unreliable imports, which can, at times, force our country to pay extreme prices on world markets to top up our gas or electricity because we do not have enough for ourselves. We are a fortunate country with many opportunities to produce fossil fuel and renewable energy. We have been a bit lax in recent years in not putting in enough investment, so I hope that the Secretary of State will look again at the incentives—as I am sure he will—and at the predictability of contracts and investment, so that Britain is a great place in which to invest for these purposes, and so we can exploit more of our energy and have more reliable supplies, even generating a surplus in some areas so that we can help Europe, which is very short of energy and does not have many of our natural advantages.

My concluding point is that we cannot go on for too long with a complex net of subsidies, price controls and interventions without damaging the marketplace more widely and sending the wrong signals, so I am glad that this measure will be short-term. We need a better system for the future so that there can be plenty of support for those on low incomes if energy prices remain high, but also much more investment to solve the underlying problem.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

--- Later in debate ---

[Barry Gardiner (Brent North) (Lab)]

If it walks like a duck and quacks like a duck, it is a duck; and if it looks like a tax and takes money like a tax, it is a tax.

This Bill introduces another windfall tax, not on the oil and gas producers but on the renewables producers. It is in the form of a cap on the revenues that renewable and nuclear companies can make. The electricity price is set on the basis of the wholesale gas price, and when the gas price went up companies saw an increase in the price they were paid for the electricity that they produced, although they did not have to pay the increased gas prices to produce it. When the Minister for Climate, the right hon. Member for Beverley and Holderness (Graham Stuart), told the Select Committee the other day that this was not a windfall tax, his official tried to persuade us that it was simply a reframing of the regulations, but in fact the Government are trying to force those companies into a retrospective contract for difference, and they should be honest about it.

But look who benefits! The Government continue to allow the oil and gas companies to make excess profits from the global crisis, and also give them a way to claw back the windfall tax under the investment allowance scheme by claiming as a tax break 91p in every pound they invest in more production in the North sea. The Minister must explain why the Government are compensating these companies for the windfall tax, and also why the renewables companies—which are the ones we really need to incentivise to invest in more capacity—are being hit by this revenue cap, while not being given a similar investment allowance.

Before the temporary windfall tax the UK levied the lowest tax take from its oil and gas producers anywhere in the world, and even with the temporary windfall tax it still taxes a full 6% below the global average. If the UK taxed these companies even at the global average, it would recover an extra £13.4 billion for the Exchequer each year. The Committee on Climate Change wrote to the previous Chancellor—when he was the previous Secretary of State for Business, Energy and Industrial Strategy but one—saying that he should support a tighter limit on production with stringent tests and a presumption against exploration. He took no notice, and the measures in this Bill are the consequences of the Government’s now being forced to protect consumers and business from their past failure to invest in renewables.

Last year, energy prices meant that an average family was paying £1,100. After the windfall tax and the unfunded borrowing, that will now be limited to an average of £2,500. The cost would, for the two years, be £31 billion, but given the statement from—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order.

Energy Prices Bill

Baroness Winterton of Doncaster Excerpts

Committee stage
Monday 17th October 2022 Commons Chamber

Question proposed, That the clause stand part of the Bill.

[The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 10, in clause 2, page 3, line 5, leave out “negative” and insert “affirmative”.

Clause 2 stand part.

Amendment 11, in clause 3, page 4, line 7, leave out “negative” and insert “affirmative”.

Clauses 3 to 8 stand part.

Amendment 19, in clause 9, page 8, line 3, at end insert—

‘(2A) Within two weeks of this Act coming into force the Secretary of State must make a statement to Parliament as to whether he intends to introduce regulations under subsections (1) or (2), and including any indicative reductions that will be implemented.”

This amendment would require the Government to state within two weeks of Royal Assent whether it will introduce regulations under clause 9.

Amendment 7, in clause 9, page 8, line 16, at end insert—

‘(4A) Regulations under this section must apply to non-domestic customers—

(a) that signed a fixed agreement with their energy provider after 1 December 2021, and

(b) on variable rates tariffs.”

This amendment would ensure that non-domestic customers who signed a fixed tariff agreement between 1 December 2021 and 1 April 2022 also benefit from the reduced energy charges.

Amendment 17, in clause 9, page 8, line 17, leave out “may” and insert “must”.

Amendment 18, in clause 9, page 8, line 18, after “section” insert “, and provide a report to Parliament setting out the amount of money paid to electricity and gas suppliers over the 6 month period, an estimate of how many businesses have been supported, and a business sectorial breakdown of the financial support provided.”

This amendment is to enable analysis of the cost of the scheme, the types of businesses supported, and the approximate sums paid to different business sectors.

Clauses 9 to 12 stand part.

Amendment 16, in clause 13, page 10, line 26, at end insert—

‘(1A) The Secretary of State may establish a domestic fuel reduction scheme in Great Britain for off gas grid homes heated from supplies of fossil fuels such as LPG and oil.”.

Amendment 6, in clause 13, page 10, line 37, at end insert—

‘(3A) The Secretary of State must make alternative fuel payments to non-domestic consumers of energy who are not connected to the gas or electricity grid and who will not benefit from the non-domestic energy bill relief schemes, and these payments must be at a level which provides such consumers with a cost reduction equivalent to those consumers benefiting from the non-domestic energy bill relief schemes.”.

This amendment would provide non-domestic customers that are off grid and who are not covered by the Energy Bill Relief Scheme with support which has parity with that given to other non-domestic users.

Amendment 9, in clause 13, page 10, line 37, at end insert—

‘(3A) Any payments made to energy users not connected to the gas or electricity networks must be provided direct to those users’ bank accounts.”.

This amendment would ensure that those receiving payments under the Alternative Fuel Payments schemes do so through their bank accounts rather than through their electricity bill.

Clause 13 stand part.

Amendment 12, in clause 14, page 11, line 24, leave out “as soon as reasonably practicable” and insert “within 28 days of the expenditure being incurred”.

Amendment 13, in clause 14, page 11, line 25, at end insert “; and in calculating the period of 28 days, no account is to be taken of any whole days that fall within a period during which—

(a) Parliament is dissolved or prorogued, or

(b) either House of Parliament is adjourned for more than four days.”.

Clauses 14 and 15 stand part.

Amendment 14, in clause 16, page 14, line 40, leave out “The first”.

Amendment 15, in clause 16, page 14, line 41, leave out “any other regulations under this section are subject to the negative procedure”.

Clause 16 stand part.

Amendment 8, in clause 17, page 15, line 24, at end insert—

‘(2A) The Secretary of State must place any information received in response to a direction under subsection (1) in the Library of the House of Commons.”.

This amendment would require the Secretary of State to place in the Commons Library the responses to any direction to an electricity generator to provide information under the power in clause 17(1).

Clauses 17 and 18 stand part.

Amendment 4, in clause 19, page 16, line 37, at end insert—

‘(1A) Regulations under subsection (1) must provide that the pass-through requirements on intermediaries are in force until at least 30 September 2024.”.

This amendment would ensure that the requirement on intermediaries to pass through to end users the benefit of Government price support will last for two years.

Clauses 19 to 26 stand part.

Amendment 1, in clause 27, page 22, line 40, at end insert—

“(c) anything done or proposed to be done to prevent electricity generators and oil and gas producers from passing on the costs of any levy imposed on them or payments they are required to make under this Act.”.

This amendment is a power for the Secretary of State to undertake consequential actions in order to secure the full reduction in the cost of domestic or non-domestic energy bills in Great Britain.

Clauses 27 to 30 stand part.

New clause 1—Impact assessment on VAT zero rating insulation works for tenement buildings in Scotland—

‘Within six months of the date of Royal Assent to this Act, the Secretary of State must carry out an assessment of the impact of zero rating value added tax on work and materials to insulate tenement buildings in Scotland.’.

New clause 2—Marginal cost of electricity—

‘Within two years of the date of Royal Assent to this Act, the Secretary of State must consult on and implement a scheme to disaggregate the cost of production of natural gas from the cost of production of other energy sources with a view to reducing the cost of electricity to domestic and commercial consumers.’.

This new clause requires the Secretary of State to devise and implement a scheme to disaggregate the cost of production of natural gas from the cost of production of other energy sources in order to reduce the cost of electricity to domestic and commercial consumers.

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.’

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.

New clause 4—Energy cost support for users of heat networks—

‘(1) The Secretary of State must make energy cost support payments to users of heat networks who will not benefit from the Energy Price Guarantee.

(2) These payments must be at a level which provides such users with a cost reduction equivalent to that received by those benefiting from the Energy Price Guarantee.

(3) These payments must apply from 1st October 2022 and run for two years.’

This new clause would ensure that users of heat networks will receive energy cost support for two years.

New clause 5—Report on support for business after six months—

‘Within one week of the date of Royal Assent to this Act, the Secretary of State must lay before Parliament a statement about the support that will be offered to non-domestic customers in Great Britain and Northern Ireland when the initial six-month period of support has ended.’

This new clause would require the Government to produce a report on support for business after the initial six months one week after the Bill receives Royal Assent.

New clause 6—Impact assessment of a housing decarbonisation scheme—

‘(1) Within six months of the date of Royal Assent to this Act, the Secretary of State must work with the devolved authorities to carry out an assessment of the potential impact of a housing decarbonisation scheme.

(2) The assessment must set out the different impacts of reaching the following Energy Performance Certificate (EPC) ratings—

(a) all domestic properties in the UK to EPC rating “A” by 2030;

(b) all domestic properties in the UK to EPC rating “B” by 2030;

(c) all domestic properties in the UK to EPC rating “C” by 2030.

(3) The assessment must consider the impact of a housing decarbonisation scheme under the different scenarios outlined in subsection (2) on—

(a) average domestic energy bills for households across the Wales, England, Scotland and Northern Ireland;

(b) the number of households living in fuel poverty in Wales, England, Scotland and Northern Ireland;

(c) the Welsh Government’s climate targets;

(d) the UK Government’s climate targets;

(e) the Scottish Government’s Climate Targets;

(f) the Northern Ireland Executive’s Climate Targets.

(4) The impact assessment must be co-authored by—

(a) the UK Government;

(b) the Welsh Government;

(c) the Scottish Government;

(d) the Northern Ireland Executive.

(5) A report on the findings of the impact assessment must be laid before Parliament within three months of its publication.

(6) The Secretary of State must make an oral statement to the House of Commons when any report under subsection (4) is laid.’

This new clause would require the Government to work with the devolved authorities to assess the impact of a UK-wide housing decarbonisation scheme.

New clause 7—Impact assessment of setting the Domestic Energy Price Reduction Scheme at the pre-April Ofgem cap levels—

‘(1) Within one month of the date of Royal Assent to this Act, the Secretary of State must carry out an assessment of the potential impact of using the Domestic Energy Price Reduction Scheme to set domestic energy bills for Scotland, Wales and England at the following levels—

(a) £1,277 for standard-variable tariffs;

(b) £1,309 for pre-payment meters.

(2) The Impact assessment must consider the impact of the policy set out in subsection (1) on—

(a) the number of households living in fuel poverty in Scotland, Wales and England;

(b) the number of children living in relative income poverty in Scotland, Wales and England;

(c) the number of children living in absolute income poverty in Scotland, Wales and England.’

This new clause would require the UK Government to assess the impact of using the price reduction scheme to set energy prices at the pre-April Ofgem cap levels.

New clause 8—Review of forecast and outturn revenue and profits of electricity generators and UK oil and gas producers—

‘(1) The Secretary of State shall, within one month of the passing of this Bill and every six months thereafter, publish an assessment of forecast and outturn revenue and profits of electricity generators and oil and gas producers.

(2) This review must cover all electricity generators as specified in section 16(10) of this Act and all companies carrying on a ringfenced trade as defined in Clause 1 of the Energy (Oil and Gas) Profits Levy Act 2022.

(3) This review must consider total revenue and profits from UK production and generation that are forecast in each financial year from 2022/23 until 2025/26, as well as outturn revenue and profits in these years when data becomes available.”

This new clause would require the Government to assess the revenue and profits of electricity generators and oil and gas producers every six months until 2025/26.

New clause 9—Removing regional variation from standing charges—

‘The Secretary of State must make provision to ensure that electricity standing charges are uniform throughout the country, including England, Northern Ireland, Scotland and Wales.’

This new clause would end regional variations of electricity standing charges.

New clause 10—Establishment of a domestic home heating oil voucher scheme for households in Northern Ireland—

‘(1) The Secretary of State must establish a domestic home heating oil voucher scheme for households in Northern Ireland.

(2) A “domestic home heating oil scheme for Northern Ireland” is a scheme that makes provision for making voucher payments to households in Northern Ireland to provide either 1000 litres of home heating oil, or a quantity that is substantially consistent with the support offered to domestic gas customers.’

New clause 11—Energy Profits Levy—

‘(1) The Secretary of State must lay before the House 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 1st 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 its current level of 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 the House an official estimate of the oil and gas super profits over the next two years.

(3) The Secretary of State must lay the report no later than 31st October 2022.’

This new clause would require the Secretary of State to lay a report before the House detailing the impact of expanding the government’s Energy (Oil and Gas) Profits Levy.

New clause 12—Energy cost support for off-grid consumers—

‘(1) The Secretary of State must make energy cost support payments to users who are not connected to either the gas or electricity grid and who will not benefit from either the Energy Price Guarantee or Energy Bill Relief Scheme.

(2) These payments must be at a level which provides such users with a cost reduction equivalent to those benefiting from the Energy Price Guarantee.

(3) These payments must apply from 1st October 2022 and run for two years.’

This new clause would ensure those off-grid will receive energy cost support for two years.

New clause 13—Report into effectiveness of energy efficiency programmes in reducing energy costs—

‘(1) The Government must review the impact of energy efficiency programmes in reducing energy costs in accordance with this section and lay a report of that review before the House of Commons within 6 months of the passing of this Act.

(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) solar panels, and

(ii) replacement of gas boilers,

(c) increases in renewable energy sources, and

(d) public messaging campaigns in changing energy usage habits.’

This new clause would require the Secretary of State to report on the impact of energy efficiency programmes in reducing energy costs.

New clause 14—Fuel poverty impact analyses of provisions of this Act—

‘(1) The Chancellor of the Exchequer must lay before the House by 31st January 2023 a report assessing the impact of this Act on fuel poverty, taking into account the following two scenarios—

(a) the energy price cap being set at its current level of £2,500, and

(b) the energy price cap being set at £1,971.

(2) A review under this section must consider the impact of the provisions of the Act on—

(a) households at different levels of income,

(b) households in receipt of the Alternative Fuel Payment (that is, not connected to either gas or electricity grid),

(c) households who use heat networks, and

(d) households in rural communities.

(3) A review under this section must include a separate analysis of each separate measure in the Act, and must also consider the cumulative impact of the Act as a whole.’

This new clause would require the Secretary of State to report on the impact of the provisions of the Act on the level of fuel poverty.

New clause 15—Report into the impact of provisions in the Act on the long term viability of the green energy industry—

‘(1) The Government must review the impact of provisions in the Act on the long term viability of the green energy industry.

(2) A review under this section must consider the impact of the Act on—

(a) the likelihood of achieving net zero by 2050, and

(b) creating allowances for investment in green energy.’

This new clause would require the Secretary of State to report on the long term viability of the green energy industry.

New clause 16—Investment in renewables—

‘In exercising the powers under this Act the Secretary of State must seek to ensure that they do not disincentivise investment in renewables.’

This new clause would require the Government not to disincentivise investment in renewables when exercising the powers under this Act.

New clause 17—Calculation of energy and gas prices—

‘The Secretary of State must publish details of how the Government has determined the relative levels of the gas and electricity price reductions brought into effect under the provisions of this Act.’

This new clause would require the Government to explain how it has arrived at the electricity and gas price reductions under the Act.

Manuscript new clause 18— Energy support after April 2023—

‘(1) The Government must lay a report before the House of Commons within 28 days of Royal Assent stating what energy price support it will provide from April 2023 onwards.

(2) The report must also contain—

(a) an estimate of what average domestic energy bills are expected to be in April 2023 if no further support provided;

(b) an estimate of how many households will be classed as being in (a) fuel poverty and (b) extreme fuel poverty if no further support is provided;

(c) what the extension of the universal support scheme for a further—

(i) 6 months;

(ii) 12 months and

(iii) 18 months is estimated to cost; and

(d) what alternative support schemes the Government will introduce to prevent any further increases in fuel poverty and protect the most vulnerable including—

(i) pensioner households,

(ii) those with disabilities and

(iii) those in receipt of benefits.’

This new clause would require the Government to make a report to the House setting out the energy support it will provide from April 2023 onwards.

That schedule 1 be the First schedule to the Bill.

That schedule 2 be the Second schedule to the Bill.

That schedule 3 be the Third schedule to the Bill.

That schedule 4 be the Fourth schedule to the Bill.

That schedule 5 be the Fifth schedule to the Bill.

Amendment 2, in schedule 6, page 36, line 17, after ”may” insert

‘provide for the reduction of the amount charged for domestic electricity supply from 8 September 2022 but’.

This amendment allows the domestic electricity price reduction scheme to begin from 8September 2022.

Amendment 3, in schedule 6, page 36, line 25, after ”may” insert

‘provide for the reduction of the amount charged for domestic electricity supply from 8 September 2022 but’.

This amendment allows the domestic electricity price reduction scheme to begin from 8 September 2022.

Amendment 5, in schedule 6, page 37, line 22, leave out sub-paragraphs (1) to (4) and insert—

‘5 (1) Regulations under section 9(1) and 9(2) must provide for the reduction of charges for electricity supply and for gas supply to last for a period of two years beginning with the operative date.’.

This amendment would require the support for non-domestic electricity and gas users in Great Britain to continue for two years.

Amendment 20, in schedule 6, page 39, line 6, leave out “three years and six months” and insert “two years”.

That schedule 6 be the Sixth schedule to the Bill.

That schedule 7 be the Seventh schedule to the Bill.

[The Minister for Climate (Graham Stuart)]

We are facing a global energy crisis, which has been exacerbated by Russia’s illegal invasion of Ukraine. This Bill puts support to help people, businesses, charities and the public sector across the UK with their energy bills on a secure legislative footing. It is a vital step in delivering the necessary package of assistance for the whole of the UK. We are putting the Bill through in an expedited way, and I thank His Majesty’s Opposition and other parties for their constructive engagement with us ahead of today. It is important that I put on record what the Bill will do, but I will seek to be brief because a number of Members are keen to speak to their amendments.

Clause1, together with clauses 2 to 8, provides for the establishment in legislation of the energy price guarantee schemes in Great Britain and Northern Ireland for electricity and gas. The EPG represents significant and bold action that will help to protect families from the spiralling cost of energy. This clause provides for the establishment of the EPG schemes and for them to be amended and revoked. For example, the schemes could be amended to change the eligible tariffs or the amount of financial support provided. The GB scheme has been operational from 1 October and delivered through contracts between the Secretary of State and energy suppliers. The Bill will put the scheme on a more secure statutory footing. The House will be aware that the Chancellor’s statement intends to refine the scheme after six months.

Clauses 9 to 12 will introduce a scheme that enables the Government to reduce the charges for electricity and gas supplied by licensed electricity suppliers to eligible non-domestic customers in Great Britain and Northern Ireland. This scheme represents significant and bold action to protect all eligible non-domestic customers, including businesses, charities and the public sector, such as hospitals and schools, from excessively high energy bills over the winter period. Without this intervention, the wider negative effects of this economic pressure would be severe and would materialise very quickly.