Energy Prices Bill - Second Reading

– in the House of Lords at 5:00 pm on 19th October 2022.

Alert me about debates like this

Lord Callanan:

Moved by Lord Callanan

That the Bill be read a second time.

14th Report from the Delegated Powers Committee, 4th Report from the Constitution Committee

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

My Lords, Russia’s illegal invasion of Ukraine and its impact on global energy markets have affected families and businesses up and down this country. As we approach winter, this Government have made bold decisions so that homes are kept warm and businesses are kept open. On 8 September, the Prime Minister set out a comprehensive package to tackle rising energy prices. As part of this, she announced that we would bring forward emergency legislation, which is before noble Lords today.

I thank the Opposition and the whole House for their constructive engagement to expedite the Bill. Providing support to those who need it is a shared value across all parties, as seen in Monday’s proceedings in the other place. I also thank the DPRRC for its report on the Bill, published this morning. I welcome its constructive comments on ensuring that the powers in the Bill are appropriately drafted and justified. We will of course be responding to the committee shortly; however, it is important that we remember the context of the Bill and ensure that consumers are able to benefit from the Bill as intended and as I will set out.

The Energy Prices Bill means that consumers will pay a fairer price for their electricity and that no one is left behind. First, the Bill provides the legislative footing for the energy price guarantee, which will protect UK households from soaring energy prices. By reducing the unit cost of electricity and gas, the typical household will have the equivalent of an annual bill of £2,500. Effective from 1 October this year to the end of March next year, the energy price guarantee will provide domestic consumers in Great Britain and Northern Ireland with crucial support in the winter months.

To ensure that support is available up and down the country, an alternative fuel payment will provide a one-off £100 payment to UK households that use alternative fuels for heating. Heat network consumers will also receive a one-off £100 payment. We are exploring delivery routes for the alternative fuel payments in Northern Ireland as well.

The energy bills support scheme was announced earlier this year to provide £400 to support households. I confirm that, through this Bill, households in Northern Ireland will be able to receive equivalent support to those in Great Britain.

The Bill also provides support for non-domestic consumers, such as businesses, charities, schools and hospitals. The energy bill relief scheme will enable the Government to provide financial assistance to all eligible non-domestic organisations in Great Britain and Northern Ireland over the coming winter period. Bills will be reduced by a new government-supported price, which is less than half the wholesale prices anticipated this winter. Discounts apply from 1 October 2022, with an initial period of six months.

In three months, the Government will publish a review to consider how to continue support for non-domestic users, particularly those most vulnerable to energy price rises. The Bill provides that the scheme may be extended to those deemed eligible for up to four consecutive six-month periods. For non-domestic consumers who use heating oil or alternative fuels instead of gas, the Bill will also introduce a non-domestic alternative fuels payment. This support will likely take the form of a flat-rate payment delivered via electricity bills.

This legislation strengthens previous action by requiring, rather than expecting, landlords and other intermediaries to pass on the energy price support they receive to end-users, such as tenants, as appropriate. This applies to the energy price guarantee, to the energy bills support scheme and to the energy bill relief scheme. The Bill will also ensure that heat networks benefiting from the energy bill relief scheme pass through cost savings to their consumers. The Bill will provide for the appointment of an alternative dispute resolution body to handle complaints raised by consumers against their heat network if it has not complied with those pass-through requirements.

Finally, we must protect consumers from paying excessive amounts for this low-cost electricity, while ensuring that no firms are unduly profiting from Russia’s illegal invasion of Ukraine. Wholesale electricity prices are currently set by gas-fired generation, which is the most expensive form of generation. This means that consumers are having to pay over the odds for cheap low-carbon generation. The powers in the Bill will allow us to introduce a temporary cost-plus revenue limit for low-carbon generators that are not currently covered by a contract for difference. This will allow generators to cover their costs and receive an appropriate revenue that reflects their investment commitment and risk profile. The precise mechanisms will be subject to a consultation to be launched shortly, ahead of it coming into force from the start of 2023.

I stress that this is not a windfall tax; this is a targeted intervention to deal with a specific problem that has occurred in the wholesale electricity market. It will help to break the link between abnormally high gas prices and the cost to consumers of low-carbon electricity. We are also legislating for powers that will allow us to offer a contract for difference to existing generators not currently covered by the Government’s existing contracts for difference scheme.

Photo of Lord Liddle Lord Liddle Labour

I raised this point about a windfall tax last week, so I thought I would be justified in intervening today. There is an argument that a windfall tax, which is predictable because the suppliers of electricity know what bills they are going to have to pay, is better in terms of promoting long-term investment in renewables, which we desperately need, than this cost-plus arrangement, which is also variable, as I understand it, by ministerial order. That provides no certainty for potential investment.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I am not sure the noble Lord is correct. The reason we have selected this mechanism is that it is a complicated picture; of course, many suppliers would no doubt argue that they have sold ahead their production to energy retailers, et cetera, and therefore the precise circumstances of every individual supplier will determine the arrangements that will be appropriate for them. It is not a windfall tax because a windfall tax would be levied on profits and would go to the Exchequer. This money clearly does not go near the Exchequer; it will go directly to consumers in the form of lower bills.

I mentioned that we will also introduce a contract for difference to existing generators that are not currently covered by the Government’s existing contracts for difference scheme. We hope that many of these suppliers will move voluntarily to contracts for difference payments, which will provide them with secure long-term revenue, and therefore there will be no need to impose this cost-plus mechanism.

The voluntary contract would grant existing generators longer-term revenue certainty and safeguard consumers from future price rises. This Bill is part of the swift, decisive action we are taking to deliver affordable and secure energy in the UK. There are no cost-free actions, but I think the whole House agrees that it would be wrong to do nothing. This Government will always act decisively to support households and help businesses grow. The consequences of not acting now would mean worse economic outcomes going forward; this Bill will provide certainty, reduce inflation and support economic growth. I would welcome the support of noble Lords in ensuring the Bill becomes law and therefore commend it to the House.

Photo of Lord Lennie Lord Lennie Opposition Whip (Lords), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade) 5:09 pm, 19th October 2022

My Lords, I confirm to the Minister that we support the passage of the Energy Prices Bill, but can he explain to the House whatever has happened to the Energy Bill, which has been shelved somewhere, waiting for someone to make a decision about its future? Without support, consumers and small businesses would be facing an eye-watering increase in their bills—estimated to be somewhere between £5,000 and £10,000, respectively—so the Government have acted and the Opposition support them in doing so. Having said that, they are in a deep mess entirely of their own making.

To give noble Lords a recent example, on Monday I, and perhaps other noble Lords, received a letter from the Minister inviting me to yesterday’s briefing about this Bill. In the letter, the Minister wrote in the first highlighted, bullet-pointed paragraph:

“The Energy Price Guarantee will ensure that a typical household in GB pays around £2500 a year on their energy bill for the next 2 years from 1 October 2022”.

About half an hour after I received this invitation, this month’s Chancellor announced a screeching U-turn, and the two-year pledge went down to six months. Did no one tell the Minister before he wrote the letter? It reminds me of Prufrock:

“In a minute there is time

For decisions and revisions which a minute will reverse.”

My first overarching question to the Minister is this: can we rely on anything this Government are now saying?

The Energy Prices Bill is facing parliamentary scrutiny after it has been acted on. I thank the Delegated Powers and Regulatory Reform Committee for the report it published this morning, which is in essence a condemnatory judgment of the Government. The Bill has to take effect from 1 October 2022, but what does it do and what does it not do?

The unit price cap will mean an average consumer’s annual bill will rise to £2,500, in contrast to Labour’s fully funded price freeze at about £1,900 from September. There is no additional support for the 15% of off-grid households, in contrast to Labour’s plan which would provide £1,000 of help. There is also no additional support for customers on prepayment meters—4 million households—who use approximately 60% of their energy over the winter months as bills are not smoothed out. This contrasts with Labour’s plan, which would save them an average of £1,300. Ten million families will still spend more than 10% of their income on energy, according to a recent study by the University of York.

I turn to the windfall tax—or non-windfall tax—and how the Government propose to pay for this measure. They have spent the last period in office rubbishing the very idea of a windfall tax as “unconservative”, but in Clause 16 we see a windfall tax in anything but name that the Secretary of State may impose on the energy giants. The clause is titled

“Temporary requirement for electricity generators to make payments”.

I will read it out:

“The Secretary of State may, for a purpose mentioned in subsection (2), make regulations for, and in connection with, requiring periodic payments to be made to a payment administrator by … specified electricity generators … electricity generators that are of a specified description, or … electricity generators that are designated by the Secretary of State in accordance with the regulations … The purposes are … the purpose of enabling a payment administrator to obtain funds for paying to electricity suppliers in connection with reducing the cost to customers of electricity … the purpose of enabling a payment administrator to obtain funds for meeting expenditure incurred or to be incurred by the Secretary of State in reducing the cost to customers of electricity.”

If it sounds like a windfall tax, if it smells like windfall tax—it is a windfall tax. Even John Redwood described it as a “surrogate windfall tax” in the other place. Energy giants are making £170 billion in excess profits, and they may be required to make payments. Let us call it what it is: a windfall tax, and the Government should do it properly. The level set must contribute significantly to the price support for businesses and consumers. The Government must now end the absurd multi-billion-pound loophole in the windfall tax for oil and gas companies. Above all, it must be fair to customers.

Oil and gas companies are currently enjoying a massive loophole for investing in fossil fuels, so why do the Government think it right to leave billions of unearned, unexpected windfall gains in the pockets of oil and gas giants, thereby forcing people to pick up more of the costs of this support in higher borrowing and higher taxes for the future? How can the Government defend tilting the pitch away from cheap, home-grown, low-carbon power in favour of expensive, insecure, planet-wrecking fossil fuels? The powers are ill defined, the size of the levy is unknown and how much it would raise is unclear. How will the Government ensure fairness with a fossil fuel windfall tax?

The Labour Party will bring forward amendments to the Bill. In line with our fully funded policy, we would seek for the energy price guarantee to take effect from 8 September rather than 1 October. The powers in Clause 21, highlighted by the Delegated Powers Committee, and Clause 22, to modify energy licences and issue directions to licence holders, are a power grab by the Secretary of State. They are not compellingly justified and should be subject to proper parliamentary scrutiny, not the negative procedure. The Delegated Powers Committee is disdainful of what it calls “camouflaged legislation” in the Bill, saying it is “inappropriate”.

For the Government to think that the answer to a slow-to-react regulatory regime is to override it by giving powers to the Secretary of State is fanciful, especially now, with confidence in the Government’s handling of affairs at an all-time low. There is no long-term plan to get us out of the crisis. Electricity and gas prices should be delinked, and Labour would require the Government to develop a plan to do this. Consumers need some certainty to be able to plan for their futures.

There is an unfair £5 billion loophole in the existing windfall on fossil fuels, introduced by the previous Chancellor or the one before. For every £1 invested in oil, gas and fracking, companies get back 91p. Nothing like that exists for renewables or nuclear fuel, and we need this to be levelled up.

We would require the Government to report, assessing the impact of reducing the Energy (Oil and Gas) Profits Levy Act investment allowance from 80% to 5%, particularly on bills. We would also require the Government to assess the revenue and profits of electricity generators and oil and gas producers on a six-monthly basis.

On renewables, Defra is seeking to block landowners from developing solar energy farms. Some 0.1% of agricultural land is currently used for solar energy generation. If that is increased tenfold, it would mean that 1% of agricultural land was used in this way. Who does not like solar energy panels, and why not? They are capable of producing the equivalent of what 10 nuclear power stations produce for the country. We previously heard the noble Lord, Lord True, talk about the need for self-sufficiency in energy; this would be a good start.

We will lurch from crisis to crisis if we do not learn the lessons from this one. We must become much more self-sufficient in our energy production. This will mean a sprint for growth in renewables and nuclear, and a massive programme of energy efficiency across the country. The powers are with the Government, and I commend this to the House.

Photo of Lord Foster of Bath Lord Foster of Bath Liberal Democrat 5:18 pm, 19th October 2022

My Lords, on these Benches we too support the broad thrust of the Bill, but like the noble Lord, Lord Lennie, we wonder what it might look like by the time it gets to us in Committee just next Monday. We also share the concern of the Delegated Powers and Regulatory Reform Committee about the unfettered powers being given to the Secretary of State without any time constraint—powers that enable the Secretary of State to make large changes to the sector without consultation or the right to appeal. As others will no doubt point out, we are concerned that the measures in the Bill treat renewables such as wind and solar less favourably than oil and gas. However, I will concentrate on two issues not covered in the Bill which I believe should be.

The Long Title of the Bill is:

“A Bill to Make provision for controlling energy prices; to encourage the efficient use and supply of energy; and for other purposes connected to the energy crisis.”

So, in addition to pricing and supply, the Bill is also meant to be about the efficient use of energy, yet it is hardly mentioned. Unlike those in many other countries, it seems our Government have no strategic interest in encouraging anyone in the UK to save energy. The International Energy Agency describes energy efficiency in priority terms as the “first fuel”. It reckons that at least half of the improvements needed to deliver net zero by 2050 will come from greater energy efficiency. However, in the UK, far too many people cannot use energy efficiently: their homes leak heat because they are poorly insulated. Around 15 million homes are below energy performance certificate band C. In other words, 15 million homes are inadequately insulated, so they cost more to heat—on average, almost £800 a year. Yet in the absence of a clear national programme, home insulation work has plunged by 50% over the past year, leading Doug Parr of Greenpeace to say:

“It’s frankly astonishing that this dip in insulation rates comes at exactly the time we should be ramping up this proven, long-term solution to the cost of living crisis.”

Even the Conservative-inclined Sun newspaper said in August:

“Householders faced with astronomical heating costs need lagging for their homes, not a government lagging behind.”

So, measures to improve energy efficiency should be a top priority for the Government, with a clear strategy and evidence of real commitment.

As the Minister knows, I have spoken many times about the need to establish the Government’s own energy efficiency targets in law. I have argued that it is the retrofit industry that will deliver the Government’s energy efficiency targets, but the industry has lost confidence after being let down by numerous failed schemes. The industry has shrunk, and the amount of energy efficiency work has fallen dramatically. The industry itself argues that to persuade it now to invest in research, training and equipment, it needs the confidence that putting targets into legislation would give. Conservative Ministers, including the current Chancellor, have claimed numerous times to believe in doing just that—enshrining targets into law. A Defra document states:

“A legally binding long-term target gives a clear signal to industry of the direction of future government policy. This may increase investor confidence and encourage industry to invest in infrastructure and research that will drive innovation”.

The Government have two main targets: for all fuel-poor homes to be EPC band C by 2030; and for all remaining homes to be EPC band C by 2035. However, to date, the Government have refused to put those targets into law to make them legally binding as the industry has requested. I have received no credible explanation for this failure, so I will table an amendment to the Bill in Committee. Last night, your Lordships agreed an amendment to the Social Housing (Regulation) Bill which did at least put an energy efficiency target for social housing into legislation. I hope noble Lords will agree that all the Government’s energy efficiency targets should follow suit. I hope the Minister will explain in detail the Government’s plans in relation to energy efficiency and why it is absent from the Bill.

I now turn to another issue I recently raised which I believe should form part of the strategy to improve the supply of energy: the role that solar energy can play. Residential solar systems are already very popular, reducing bills and often being able to supply excess energy back to the grid at times when it is under pressure. I recently installed solar panels on my own home, adding to the 1.2 million homes that have done the same. Together, these domestic solar PV systems have the same generation capacity as the forthcoming nuclear plant at Hinkley Point. We should be encouraging more households to do the same and helping those with existing systems to get them working more efficiently.

In the March Spring Statement, it was announced that certain energy-saving materials would be eligible for a 0% rate of VAT on both labour and parts, and I welcome that. Solar panels and batteries, which store energy from solar panels for later use, are covered if fitted at the same time, but any battery added separately at a later date is not covered. Retrofit batteries will continue to be subject to VAT at 20%. Modern solar systems usually include a battery, but many systems installed just a few years ago do not. With more efficient and cheaper batteries now available, it makes sense for those with older systems to add a battery. The solar energy their panels generate can be used far more efficiently to the benefit of the home owner and the country overall. However, the 20% VAT rate is likely to deter many. I believe that retrospectively added batteries should also benefit from zero VAT and will bring an amendment to that effect in Committee.

Indeed, there are many other energy-saving items such as double glazing and draught excluders which are not covered by the zero VAT rate. Their take-up would increase were they to be included, which would again be to the benefit of the home owner and the country. I hope the Minister can share his view on this proposal.

Photo of Lord Framlingham Lord Framlingham Conservative

I am listening to the noble Lord’s speech with great interest. I understand that there are thousands and thousands of acres of factory roofs in this country. Would it not be a very good idea for them all to be encouraged to have solar panels?

Photo of Lord Foster of Bath Lord Foster of Bath Liberal Democrat

Indeed. The noble Lord is absolutely right. I was going to come on to that point. The UK Warehousing Association says that if we could get solar panels on all its warehouses, we would get 15 gigawatts of energy. The difficulty—perhaps the Minister can comment on this—is that there is difficulty in many cases with connecting to the grid. We need to find ways to help them achieve that for the benefit that the Minister just mentioned. I hope we can hear the Minister’s views on these issues, without him just shrugging them off as he has in the past, saying that this is a matter for the Chancellor.

Just like warehouses, other forms of non-domestic solar are vital; solar farms provide one such example. But we hear from media reports—the Minister can perhaps confirm whether this is true—that the Environment Secretary wishes to prevent new ones being built on the apparent basis that they are a threat to food security. Yet solar farms are a major UK success story that does not require subsidy. The chief executive of the trade association Solar Energy UK told the Financial Times last week that there is more than £20 billion of private capital in the project pipeline—investment, as well as the jobs and extra finance to support farmers it would bring, that would be lost under the Environment Secretary’s apparent plans. Yet there is no serious evidence to suggest that solar farms present a threat to food security. In fact, the opposite is true. Land around and under solar farms can and does support the UK’s nature recovery and biodiversity targets with wildflower meadows, ponds and wetlands. Solar farms drive investment, create jobs and generate clean electricity. I hope we will hear from the Minister that what we hear about the Environment Secretary’s views is incorrect.

As I said at the beginning, we support the main provisions of the Bill, but believe it is a missed opportunity to, for example, set out a clear strategic plan for addressing energy efficiency and expand and make better use of solar energy.

Photo of Baroness Worthington Baroness Worthington Crossbench 5:28 pm, 19th October 2022

My Lords, I am grateful to the Minister for introducing this Second Reading debate. I begin by saying that I welcome the decision to take action to protect consumers and businesses from sustained high energy prices ahead of this winter. Clearly, something needed to be done, and it is good that we are doing it. The energy price guarantee needs a legal footing, the energy bills support scheme needs to be supported too, and obviously extending measures for non-domestic customers is essential. The measures relating to passing on costs to tenants are welcome, as are those on heat networks and complaints. Then there is decoupling the wholesale gas price from the price we all pay.

Something needed to be done and this Bill is at least an attempt to do it, so its content is necessary and to be supported. However, it is possible to be supportive of the content but dismayed by the means by which these issues are being brought forward. You can be supportive of the what but very concerned about the how.

I wonder how we got here. It is not as if we did not know when winter was going to be or as if the invasion of Ukraine was a piece of news. Why then are we here in October, already facing emergency legislation being rushed through on an accelerated timescale when we had an Energy Bill that we were debating? In fact, we still have one, paused somewhere in the ether. I do not know whether I feel pleased or saddened that many people said at the time that that was not the Energy Bill that the country needed. This is evidence that we were right; the Government have now had to bring through emergency legislation to focus on the here and now and the issues of the greatest importance.

The most important issue is of course affordability; therefore, I am glad that we are now focusing on that. We could be sitting here talking about a hydrogen levy being applied to bills to pay for hydrogen heating, which would have been a catastrophic waste of time, so I am pleased that we are now at least focusing on the real issues at hand. However, this is a difficult Bill to engage with. It is highly complex, lots of the detail is missing, and the powers being taken are extraordinary. Therefore the how leaves me feeling very ill-prepared and concerned that we are not going to do the job that we are expected to do, which is to go through the Bill, in great detail and with great care, to prevent unintended consequences and to ensure that it is fit for purpose. I feel that, as it currently stands, we cannot do that job.

There will be unintended consequences, not least the effect on investor confidence. It is not as if we do not have other problems facing the economy at the moment. Just at a time when we need to provide certainty to markets and give investors confidence to invest in the UK and to help us deliver a transition in our energy system to a cleaner, more affordable and secure one, we are taking legislative powers which will have a chilling effect on any investor reading them. They are so broad-ranging and there are so few checks and balances that anyone considering making an investment decision in the coming weeks will be thinking twice, and I suspect that they will think that for as long as these powers last.

That brings me on to one of the big concerns, which is that the sunset clauses in the Bill are far from adequate. In fact, they really do not exist, because if you analyse some of them, at least one of the measures, the cost-plus revenue recall measure, potentially lasts for five years, and even then, it is on a rolling basis—the Secretary of State can continue to extend that deadline. No justification is given that warrants that length of time or that level of potentiality for it to continue indefinitely. The industry is truly scratching its head—I am sure we have all had the briefings pouring into our inboxes—trying to understand how it can be possible that this seemingly unjustified approach is being rushed through at such pace.

I hope that we will hear from the Minister about the response to the Delegated Powers Committee report, which picks on just two to three of the clauses that it considers to be most problematic. Clearly, if it had had more time, it would have picked up a number of other measures, but it was not given enough time, and we received the report only this morning. It has been quite scathing about certain aspects, including Clause 9 and Schedule 1, which it highlights as bringing in “camouflaged legislation” and “sub-delegated powers” which undermine democracy and will undermine the role of this House if it is allowed to continue. It also highlighted Clause 22, where it has serious concerns about the nature of the powers being taken. We need to hear from the Government their response to those concerns.

The noble Lord, Lord Foster of Bath, mentioned that some things are missing from the Bill. I do not think that we want a huge omnibus Bill to be rushed through, so it is right that we focus on the affordability leg of the challenge we face, but imagine if we had taken the same approach to the upstream sector. Here we are, looking at a Bill that makes a set of big interventions into the market, leaving it open-ended and being expected just to trust the Secretary of State’s judgment on many things. The Bill has sweeping powers—it has been described almost as nationalisation by the back door; that is how big an intervention this is—yet, when we look at what happened up stream, the Bill that was passed to introduce the windfall tax, the excess profits levy, contained a circumscribed set of things. It was very narrow. It did not have any open-ended powers. It also had a huge get-out clause where, if the sector could show that it was reinvesting in the North Sea, up to 85% of that windfall tax would be taken away.

That is how that sector was treated: with precise, time-bound interventions. It was given clear ways in which to encourage it to invest. Compare that to this sector. It is night and day. I do not think that this sector is being treated with anything like the same degree of fairness, which we should expect from legislation. Let us turn this on its head and ask what we could have achieved had we taken these powers and applied them to the upstream sector. Imagine if we had had the ability to go in with some legislative strength and say, “We don’t want you to continue to charge us these inflated prices for the product that we license you to extract”. We are a purchaser of these products from the North Sea. Rather than simply allowing the sector to price-set then try to claw the money back, could we not have done what we are doing here and had a conversation about capping the price for our own domestic consumption? If we had taken broader powers at that time and done things correctly, we might have got a better outcome than simply allowing the sector to set whatever price it feels is necessary and then trying to claw it back through a windfall tax.

As I mentioned during our helpful briefing with the Minister, there is an international dimension to everything we are talking about here. This issue needs to be seen in that context. Obviously, we are reliant on imported energy from our neighbours, particularly Norway. I want these sorts of measures and the approach of treating this issue like the emergency it is to be evident in our diplomatic efforts with the countries that supply us with our energy. Norway is a neighbour. It delivers a huge proportion of our gas—about 60% at the moment, according to the latest statistics. What are the Government doing to have a conversation with Norway about keeping the price at a reasonable level so that it does not flow through to consumers in the way it currently does? There must be a mechanism for doing that. It is not a poor country: Norway’s profits will be excessive during this period and will end up in its sovereign wealth fund, having come from our taxpayers and out of our public spending. There must be an international dimension. I would have liked to see this Bill in that much broader context of the international elements of what we are describing.

To return to the question of equality of treatment of upstream and downstream—other noble Lords will talk to this issue, I am sure—there is a distinct difference in the time of intervention. The measures in the energy profits levy will last only until 2025 but, as we have just discussed, some of the measures in this Bill may last for five years and be extended on an indefinite, rolling basis. That is simply not equivalent. There is also the fact that, in this Bill, we talk about revenues whereas, in the other intervention, we talked about profits. Why is it called revenue in one sector and profit in the other? What is the nature of the difference there?

I have touched on the Delegated Powers Committee. I hope that, by the time we get to Committee, amendments will have been tabled to change some of the negative procedures into affirmative ones. I hope that we will insert more parliamentary scrutiny into some of the powers. We will, I am sure, have to think about requirements to consult, which are absent in large parts of the Bill. Then, perhaps, we could look at further tightening up as we get time to digest some of the briefings we are getting.

My final comments are two additional points. I want to understand how the measures in this Bill interact with other elements of government policy: specifically, capacity market payments. I wonder whether we are continuing to make capacity market payments while at the same time asking for money back. I just do not know. Some of those capacity market payments apply to some of these generators, which are outside the CfD. I am thinking here about the nuclear operators. I want to understand how they interact. There is also the carbon pricing support mechanism that we have on generators. I imagine that it is currently suspended, but I would like clarification on that, because it would be crazy for us to be requiring them to pay and then asking them to pay us back.

Finally, and not to broaden the debate too widely, it strikes me that we are dealing with a commodity-based crisis, with the pricing of commodities causing consumers to feel the pain, and with potentially very serious consequences this winter. It strikes me that when we try to intervene in this market, we must always think about how we can offer support to those most in need in a targeted way, reducing the amount of deadweight support that we give out so that we get it to the people who most need it. That must be done efficiently.

We must also think about who can bear the cost of paying for this. We should not be assuming that it should be on the public purse and that we have these uncosted borrowing and spending implications coming out of the Government, because that damages our reputation, increases the cost of capital, and has a big effect on people’s confidence in us as a country.

Where could we do this recovery? Clearly, we can take it out of the electricity market, which is making excessive profits. We can also take it from the upstream oil and gas suppliers, as we have done with the windfall. However, there is another body of people who make money in this market: those involved in the trading of these commodities. Gas, and particularly oil, are highly traded commodities. There are derivatives upon derivatives that sit on top of every physical therm of gas and every barrel of oil.

I do not have much hope for this idea because of everything that we have seen coming from the current Prime Minister, but the City of London does understand commodity trading. It is home to thousands of traders in these commodities. The energy companies have thousands of traders, all making money in this market. It is a very lucrative aspect of the financial services market. I would love it if a Government could have a conversation about whether we should be levying some kind of tax on that aspect, so that it would deflate the speculative bubble that I am certain is sitting on top of some of these energy prices that we are all paying, and which will have a very damaging effect this winter if we do not do something about it.

With those final words, I reiterate my general support for the contents but my very strong concerns for how these powers are being implemented. I look forward to the rest of the debate.

Photo of The Bishop of Manchester The Bishop of Manchester Bishop 5:42 pm, 19th October 2022

My Lords, I am pleased to speak on this important and urgent piece of legislation. I declare my interest as deputy chair of the Church Commissioners’ board of governors. We own stocks in energy companies. In the light of today’s developments in the other place, I should perhaps also declare that I regularly eat tofu.

It is clear that the ongoing cost of living crisis and energy insecurity necessitate swift and comprehensive action. It is estimated that this will adversely impact up to 100,000 households in one of my local authorities, Manchester, this winter. A report published in August by the University of York predicted that more than three quarters of UK households—53 million people—will have been pushed into fuel poverty by January next. It is therefore very welcome that the Government are taking action to help the public and businesses survive the coming winter. It is also good to have the clarity set out in the Bill on the energy price guarantee and the energy bill relief scheme.

However, welcoming the Bill does not mean that I, or my colleagues on these Benches when they are here, believe that it is a latter-day Mary Poppins—practically perfect in every way. While we fully recognise the urgency of this legislation, we hope that His Majesty’s Government will take seriously the calls to amend certain of its details before we reach Committee next week.

The energy price guarantee, setting a limit to the amount households can be charged per unit of gas and electricity, is clearly needed as prices continue to rise rapidly. However, it is questionable whether this should include a temporary suspension of green levies. As Energy UK said earlier this year, reducing support for

“the very solutions that will prevent a repeat of the current crisis” would not be

“the wisest move”.

Now is the moment not only to tackle the current crisis but to double down on the strategies that will reduce, and eventually eliminate, this nation’s need for imported fuel—a need that puts us at the mercy of the international markets.

The energy bill relief scheme’s support of non-domestic customers is also very necessary. The challenge that businesses, schools, hospitals, churches and many others face is huge. Many of my churches are now working on plans to join the Warm Welcome initiative. They will extend their opening hours through the winter to offer a place for local people to cut their fuel costs by spending less time at home. Warm churches, many with free wi-fi and even free hot drinks, have a key role to play—although I confess that I never imagined, until recently, that I would be commending Church of England buildings to your Lordships’ House for their cosy warmth.

But—and here is the issue—extended opening will lead to even heavier fuel bills. Last week we announced £15 million from Church Commissioners’ funds to help keep our churches warm this winter, but that will go only part of the way. We need further clarity from the Government on how the non-domestic scheme will work in practice.

When we legislate in haste, without the usual opportunities for consultation and debate—as I accept we now must—one golden rule should be that we legislate for the minimum period necessary and with the minimum scope for Ministers to build on that legislation without full public and parliamentary scrutiny. In several respects, as earlier speakers have indicated, the Bill in its present form fails that vital test.

It is of concern that the Bill grants the Secretary of State powers to end the tariff cap when they choose, as well as broad powers to amend the energy price guarantee and energy bill relief scheme. The uncertainty surrounding the tariff cap’s duration, as the noble Baroness, Lady Worthington, has just reminded us, will likely make it more challenging to give energy suppliers the certainty they need to purchase gas and electricity in advance for customers. It is concerning that, while the Government intend these measures to be temporary, the Bill assumes they will last for a minimum of five years—longer than however many Home Secretaries and Chancellors from recent times put together.

As drafted, the Bill lacks important definitions. The term “energy crisis” is left very broad and not clarified. Further definition of this term would be greatly beneficial to ensure that such emergency power measures are used at, and only at, the appropriate time. Secondly, the Bill does not include a definition of the policy instrument it seeks to introduce. Clarifying this would surely improve the Bill. Finally, we must also ensure that, in our desire to address the very immediate and acute crisis of paying our energy bills, we are enabling and not thwarting medium-term and long-term responses to the UK’s energy security situation.

To conclude, I am sure that all noble Lords here today recognise the timely nature of these measures and welcome them overall. I urge the Government to look to improve the details of the Bill further. While I am not personally able to be in my place next Monday, my most reverend and right reverend friends on these Benches will consider tabling or supporting amendments in any areas where we feel that His Majesty’s Government have not proposed satisfactory changes to the draft legislation in response to the issues that I have raised today.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green 5:47 pm, 19th October 2022

My Lords, why are we here today? That is not an existential question but a very practical one. We are here because, without this Bill, households, businesses and institutions —such as the GP surgeries, community centres, libraries and, as the right reverend Prelate just said, churches being lined up as “warm centres” in this fearful winter—would otherwise face unpayable bills.

One direct causal factor here is the actions of President Putin, the instigator of the Russian attack on Ukraine, who just this afternoon announced further sweeping measures of repression on the Ukrainian territory that Russia still occupies and across much of his own nation.

However, the situation is not simple. This is, in the terminology of the planners, a wicked problem. That is not because we had to be in this situation today but because a decade of inaction and wrong action by successive Governments has left us with a fossil fuel-dependent energy system, dreadfully poor-quality housing stock and the great privatisation of homes under the right to buy. My honourable friend in the other place Caroline Lucas has a Private Member’s Bill calling for protection for private renters, a no-fault evictions ban, binding efficiency regulations and a rent freeze to address some of the broader issues for this desperate winter. But many homeowners too will soon be, or are already, in desperate straits, facing soaring mortgage payments. This comes at a time when incomes that were already insecure and inadequate and not keeping up with inflation are leaving people without reserves— 25% of UK households have savings of £2,100 or less.

We are where we are. We have a tottering Government with zero democratic legitimacy and public trust, and no consistency in policy or personnel, and they are offering us this Bill today. That is not to say that I or, I expect, any other noble Lord speaking in this debate will oppose its basic principles. The Government have no choice but to provide major support to households through keeping down the cost of energy to ensure that people do not freeze this winter, and that they will be able to afford a bite of toast, a cup of soup or to fill a hot-water bottle.

However, as our hard-working and fast-working Delegated Powers and Regulatory Reform Committee makes crystal clear, there are a number of powers in this Bill of truly extraordinary scope. We really need a new metaphor. Henry VIII on steroids is no longer adequate; we need instead Henry VIII with rocket boosters strapped to those sturdy legs. I offer that image freely to any cartoonist who wants to run with it.

I am sure that in Committee we will see alternative approaches and will debate the detail, so in the interest of time I am going to take a broad overview of a couple of key points. As a number of noble Lords, particularly the noble Lord, Lord Lennie, have already said, the Bill could create a major bias against renewables and in favour of oil and gas. That is an issue not just for the climate emergency but for future cost considerations for households, as soon as next April. It is effectively a 100% windfall tax on the more established renewable electricity generators, unlike the 25% tax on all gas and oil profits. We could end up in a ridiculous situation where energy producers get a huge tax reduction if they invest to pollute the planet but clean energy does not.

I have a specific question to put to the Minister. It builds on the questions put by the noble Baroness, Lady Worthington. Where do nuclear power stations and biomass firms, such as Drax, sit in this current constellation? The noble Baroness, Lady Worthington, also raised an interesting point about trading in oil and gas. This relates to a question I raised earlier on the economic Statement and the place of the financial sector in influencing our Government’s decision-making. I point the noble Baroness to the fact that, in the past, there have been well-developed proposals for what has been called a Robin Hood tax, or a Tobin tax—a model I prefer. That is something that the Government could well be looking at in this situation to address the points that the noble Baroness raised.

I come to my second key point, which is about community-owned schemes. There is a risk with this Bill that the Government will be subsidising people’s bills with one hand while taking money from their income with the other, when that money could be supporting local community prosperity. Any new regulations created or implemented under Clause 16 must include exemptions for community-owned wind farms, solar farms and hydro schemes that reinvest 100% of their profit back into communities. I note that the Environmental Audit Committee report of 29 April 2021 recognises very clearly the wider benefits from community energy projects. It would be totally counterproductive to take money out of communities while the Government presumably also want to promote social benefit and levelling up. Will the Minister agree to meet community representatives from England, Wales and Scotland to discuss how the implementation and model of the regulations under this clause can be written in a way that does not further handicap the community energy sector that has been left in the lurch over recent years?

I very much agree with the points made by the noble Lord, Lord Foster of Bath, about energy efficiency; it is there in the Long Title. I agree with everything he said about insulation and other energy-efficiency measures. We also need to look at the use of energy in neon lights, neon signs above shops and lighting in shops. Look across the channel—if we are still allowed to do so—where Governments have very quickly brought in a whole range of measures to reduce consumption. Surely we could match or get close to those.

Before coming into the Chamber I was reading Twitter, which your Lordships’ House might judge that I spend quite a bit of time doing. It led me to reflect, as I was assembling this speech, on the views that the public have of Liz Truss, Jeremy Hunt, Jacob Rees-Mogg and an alternative figure who trends as much as any of them, Martin Lewis of the website MoneySavingExpert. I suspect that if you were to offer the powers in this Bill to Mr Lewis, the public might well jump at the idea—indeed, I suspect that many Members of your Lordships’ House might be tempted to do likewise. That really helps to highlight the fact—more evident now than it was half an hour ago—that we have no idea who we could be giving these powers to. That instability is one more reason to say that we simply cannot allow these sweeping, massive powers—which could be deployed capriciously and chaotically, as so much economic decision-making has been in recent weeks—on something as crucial as the energy that will prevent people freezing this winter and ensuring that they can be fed and survive.

Photo of Baroness Young of Old Scone Baroness Young of Old Scone Labour 5:56 pm, 19th October 2022

My Lords, I put on record that I am not sure I support Martin Lewis for Prime Minister, but anything is possible.

I am sure we all support the need for the Government to act urgently to protect households from the rising costs of energy and to reduce the impact of price rises on the inflation figure. I will not comment on the pig’s ear that the mini-Budget and the subsequent fiscal event have been, other than to express a real, deep sadness at the damage done to our economic credibility and international reputation.

I will focus on three issues in the Bill. I agree with much that the noble Baroness, Lady Worthington, said on two of these issues. The first issue is concern about the nature of the powers the Bill gives to Ministers; the second is concern about the Bill’s impact on energy regulation, the energy market and investment; and the third issue, on the protection offered to off-grid households, has not been raised so far in the debate.

I start with the nature of the powers the Bill gives to Ministers. It must be a pretty rare event to be briefed on the same issues, with the same view, by the Delegated Powers and Regulatory Reform Committee and the energy producers, both fossil fuel and renewable, across Britain. I had not experienced that rather unusual combination of events before.

Although it is completely right that the Government have had to move at pace to design and deliver interventions to protect energy bill payers from even greater price shocks than they are already experiencing, we must not let haste create collateral damage through unintended consequences. The Delegated Powers and Regulatory Reform Committee’s report today is heavily critical—that is probably a mild way of presenting it —of the Bill. It regards the legislative sub-delegation it permits as totally inappropriate. In a previous report it branded such delegation as

“a more egregious erosion of democratic accountability than a simple delegation to a minister to make secondary legislation.”

There is no doubt what the committee thinks about it.

The committee is also critical of Clause 22 and the power to give direction as a Henry VIII power, allowing ministerial direction to modify legislation, including primary legislation. Such direction and modification of legislation would of course not be subject to parliamentary scrutiny. Apart from stressing the need for speed, the Government have so far been unable to explain why the required changes could not be achieved through secondary legislation, subject to parliamentary scrutiny and with the affirmative procedure applying, at least where it is used to modify primary legislation. Perhaps the Minister could respond on that. The Delegated Powers Committee has also asked for a time limit to be placed on the powers of direction, because currently there is none.

Some concerns within the whole range of energy producers fall in line with those of the Delegated Powers Committee. Their fears are that the breadth of powers being awarded to the Secretary of State would enable them to make greater changes to the energy production sectoral rules, without consultation or appeal. The powers being given have no time limit and the definition of an energy crisis, within which the powers are supposed to operate, is so broad that they could reasonably considered to be extensive and permanent.

I am sure the Minister will say that there is a need for speed, and that anything other than nodding through the Bill risks delaying help to the vulnerable people who are most impacted by rising energy prices. However, can he tell the House whether we will hear, before next week’s stages of the Bill, how the Government intend to respond to the two criticisms by the Delegated Powers Committee regarding sub-delegation and direction, which are also relevant to the concerns raised by the generators, both traditional and renewable?

Unlike the noble Lord, Lord Foster of Bath, and despite the Long Title, I do not want to see the remit of the Bill expanded. I would like it to be tightened. The Bill is necessarily having to progress at such a pace that, in the absence of time for proper consultation, it ought to be restricted to the bare minimum of interventions necessary to protect the public for the minimum period of six months, until the next review of the protection measures is due to be put in place, as announced by the Chancellor. Will the Minister agree to review the extent of the Bill and the time limitation of the legislation before we consider its further stages?

The Bill also contains provisions that are unnecessary to achieve the immediate protection of consumers from rising energy prices. For example, the Bill seeks to amend the tariff cap Act, including by removing the sunset clause for the price cap. Can the Minister tell the House why the amendment to the tariff cap Act is necessary for measures which are to be reviewed in three months, and changed in six months?

A further concern on the part of the renewables generators is the cost plus revenue limit, already referred to by the noble Baroness, Lady Worthington. If we have hasty implementation of this limit, focusing on revenue rather than profits, and link that with the Chancellor’s statement that a further extension of the windfall tax is “still on the table”, it absolutely risks shaking the confidence of investors in renewable energy. The Minister did not really respond to the intervention of my noble friend Lord Liddle in respect of the impact on investors. Will he tell the House, when he responds, what assessment has been made of the likely impact on investor confidence as a result of the method of calculating and implementing the CPRL?

My final issue is with the equivalent measures proposed by the Government for people who are off grid—the 1.1 million homes using oil, liquefied petroleum gas and other forms of fuel. I should declare an interest as an off-grid rural home owner, unable to connect to the gas grid. Mine is an older building where there is limited potential for effective energy conservation upgrading, along with a listed building officer who appears not to like heat pumps.

There are 1.1 million homes which are off grid, and they are all in varying circumstances. Many of these off-grid homes are in rural areas and many of the poorest people in rural areas live in them. They are often older buildings with limited potential for energy conservation upgrades, and no cap is proposed for heating oil. The cost of heating oil has gone from 27p per litre in April 2020 to over £1 per litre in April 2022, although it has marginally dropped since then. That is a fourfold increase. The Government have only belatedly offered £100 per annum to oil users to help meet this cost.

The Minister will no doubt say that those off the grid will also benefit from the £400 energy bills support scheme and the £1,200 represented by the cost of living benefits targeted at low-income households. However, the reality is that electricity customers will have over £1,000 of protection through the price cap while oil users and other off-grid homes will get a measly £100. To make matters worse, there is no clarity on when this measly £100 will be paid. People have been buying their winter fuel oil in advance to make sure they have stocks for winter. They have been paying excruciating prices for months, yet all that is on the table is a very small amount, very late in the day, with no clarity as to when.

There are a small number of off-grid users who are not connected to the electricity supply either. How they are going to be reimbursed, as they do not have an electricity contract, is also a question. Can the Minister tell us how the £100 was calculated? How can he assure us that it is fair proportionately for those 1.1 million homes compared with what is being done for those who are on the gas supply? Can he tell us when it will be paid?

Can I also put the Minister on notice? I have recently done that in person. Outside this Bill I was intending to harass him on the further difficulties that off-grid homes are likely to experience as a result of the proposed reforms to the off-grid regulations. These would stop fossil fuel boilers being replaced in off-grid homes from 2026. I hope the Minister is going to be able to assure me at the end of this debate that he is not proceeding with haste towards that while the heat pump market is still in its infancy and not terrifically affordable, efficient or available. I hope he can give me assurances about the off-grid regulations, but I believe that we should tread very carefully in that respect.

If not, should your off-grid oil boiler irretrievably break down the day before Christmas, you could be propelled instantly into a complex, slow, confusing and expensive process of finding a heat pump supplier and installer—they are in pretty short supply—upgrading your insulation and radiators, and funding the upfront costs of the pump and the accompanying energy efficiency upgrades. All of this would be while burning your furniture in the background to keep your granny from freezing to death over the months this would take.

I thank the Minister for our recent conversation about this. Perhaps he can provide clarity to off-grid households on the Government’s response to the off-grid regulations, including when a formal announcement will happen. In the meantime, will he assure the House that this emergency Bill will be stripped down to the minimum measures, both in extent and time, to deliver the basic energy price guarantee to avoid as many unnecessary and inadvertent consequences as possible?

Photo of Lord Redesdale Lord Redesdale Liberal Democrat 6:09 pm, 19th October 2022

My Lords, I will be extremely brief at this time of the evening, because although the Bill offers a cornucopia of issues that I would wish to speak on—I see the usual faces who participate in these debates and have followed many of the points raised, especially on energy efficiency—I have only two questions to raise.

We obviously support the Bill, and it is going through very quickly, but there has been a complete lack of consultation. One area that has not been covered in discussions is that, at the beginning of the energy crisis, it was energy retailers who were collapsing and causing a number of problems. Indeed, the Government have had to pick up billions of pounds’ worth of contracts from Bulb. My first question is: have the Minister or the department had any consultation with energy retailers? While we can focus on the suppliers and the issues they face, this is an area that will affect people in the way they are billed, especially with these measures.

A particular worry in relation to the Secretary of State—as mentioned, mostly recently, by the noble Baroness, Lady Young of Old Scone—is that regulatory risk is coming down the line. You could almost envisage that the Government will nationalise the retail space; they do not have to go down through the generator space but could nationalise energy retailers. Has this been any part of the discussions? I must declare my interest in another field as the chief executive of a water retail company. We do the same thing in the water sector, but if I were working for an energy retailer at the moment, I would be extremely worried about the way that the department has taken powers away from Ofgem—which would have given the retailers some form of security—and given itself unlimited powers. So my second question for the Minister is: has he considered a sunset clause on the powers they have taken in this Bill, so that when we move, hopefully, towards a more stable form of energy pricing, Ofgem can be given back the powers that the Secretary of State has taken? This would give some degree of certainty to the energy retailers that their business model will not be destroyed.

The retail marketplace was in trouble before the price increases made their business case very difficult—one of the big retailers, npower, left the marketplace. Therefore, can the Minister first say whether there was consultation and, secondly, whether he would consider a sunset clause?

Photo of Baroness Hayman Baroness Hayman Crossbench 6:11 pm, 19th October 2022

My Lords, I declare my interests as set out in the register. Like the noble Lord, Lord Redesdale, I hope that I can be brief, because many of the points that I wanted to make have been made very eloquently by the noble Baronesses, Lady Worthington and Lady Young of Old Scone, and the noble Lord, Lord Foster. Nevertheless, I endorse and emphasise three particular areas that have been spoken about. The first relates to the length and breadth of powers given to the Executive in the Bill. The noble Baroness, Lady Young of Old Scone, said—although she did not use this phrase—that it was something of an unholy alliance between the Delegated Powers Committee and the energy companies. There is a reason for that: all of us as parliamentarians, whether we are interested in energy or not, ought to be worried about this Bill because it goes against the advice of the Delegated Powers Committee in general about these sorts of clauses, and it does so in fine form. So, on principle, we ought to be concerned about those clauses. We ought also to be concerned about the effect that they have, and the uncertainty that they create, on the stability of markets in the energy sector.

The concerns that the energy companies—Energy UK, RenewableUK, National Grid, and businesses such as E.ON and SSE—have all stated come partly from the proposals that we will come to in a moment. I cannot remember the acronym—I am back to, “If it quacks like a duck, and walks like a duck, it is a windfall tax.” I am mixing my metaphors horribly. But they are also concerned about the effect that the lack of certainty that comes with those ill-defined powers for government will have on their ability to function in future and on their investment plans.

I come to the second point that has been made, which I want to support, about the very real risk in this Bill of disincentivising new low-carbon investment because of the way in which the scheme operates—for reasons that we all understand—for those producers that are not under contracts for difference, and the disparity between costs and prices that has occurred. The uncertainties and unfairnesses of the scheme being put forward will disincentivise new, low-carbon investment. Under the energy profits levy, oil and gas extractors are able to offset new investments against the levy. Under the proposed payments for electricity generators, no such provision is made.

Ministers in the other place simply asserted that this would not happen, when it was raised by members of the governing party there. The industry does not think that this would not happen. We absolutely need to encourage new investment in low-carbon technology, including energy storage and carbon renewals. I declare an interest as someone who has old solar panels. I absolutely agree with the point made by the noble Lord, Lord Foster, about issues such as VAT on batteries being retrofitted on those homes. We need investment, and not simply in onshore wind, although, as the Minister knows, I am very keen on investment in new onshore wind. We need to look at new technologies—at batteries, energy storage and carbon renewals and removals—and get ahead of the game, as we have been on renewable energy, on the technologies that will support that and end the problems of intermittency.

Parity could be achieved to ensure a level playing field between fossil fuel investment and investment in renewables by making amendments so that the payments are determined not just by reference to the quantity of the electricity generated but by the new investments made by the firm over the same period. I know that the Minister hopes that this problem could be solved by everyone going over to the contracts for difference and that it would be a power to keep in reserve, but that is not clear in the Bill. The Bill gives very wide-ranging and long-standing powers to the Secretary of State to change this. The oil and gas levy has a sunset clause of December 2023 so, if it is a reserve power, perhaps the Government could clarify a timeframe for the scheme and use the contracts for difference scheme and a shorter sunset clause.

Finally, I reiterate some of the points that the noble Lord, Lord Foster, made on energy efficiency. The Chancellor said that, when he looked at what would come after six months of the current subsidy support scheme, he would look at targeting it on those who need it most and at energy efficiency. I hope that he will do that, and urgently. We need a clear national strategy for energy efficiency that encompasses raising the energy efficiency of existing homes and how they will move to low-carbon heat, supported by a skills pipeline and a single source of advice, with interim targets and secure funding. Setting a clear pathway by the Government showing leadership would not only help to reduce energy demand but reduce bills for customers—and the taxpayer—now, as well as contributing to achieving our net-zero targets.

As the noble Lord, Lord Foster, said, the Government agreed last night to consult on a plan for achieving this for our 1.4 million social housing properties that are below EPC band C. The House felt strongly enough to make the Government put that commitment in the Social Housing (Regulation) Bill. I hope that the Government will consider setting out corresponding plans for the private rented sector and for owner-occupiers.

Photo of Lord Rogan Lord Rogan Deputy Chairman of Committees, Deputy Speaker (Lords) 6:20 pm, 19th October 2022

My Lords, I welcome the opportunity to add a Northern Ireland perspective to our proceedings on this critically important legislation.

The cost of living crisis continues to bite, with it being confirmed this morning that inflation has returned to a 40-year high. It is set to be a worryingly difficult winter with individuals and families having to choose whether to skip meals or heat their homes. This is a tragic state of affairs in the year 2022. I therefore support the Bill, but I have a number of concerns that I hope the Minister will endeavour to address in his wind-up remarks.

As the noble Lord, Lord Callanan, indicated, there can be no doubt that much of the blame for the current crisis is in the bloody hands of Vladimir Putin, which are choking off energy supplies across Europe and beyond. As the noble Baroness, Lady Bennett of Manor Castle, mentioned, noble Lords will be aware that the situation has become even more grave in recent hours after Mr Putin imposed martial law in the four annexed regions of Ukraine. This is an attempt to turn Ukrainians against each other on the battlefield and place even greater strain on global energy supplies. The sooner he is removed, the better for all of us —including the Russian population.

However, we are where we are, and the UK Government are correct to step forward—as other Governments are doing across Europe—to take the action they are proposing through the legislation before us. However, not for the first time, Northern Ireland finds itself in a peculiar position in comparison with the rest of the United Kingdom. As not all your Lordships may be aware, 68% of Northern Ireland households use home heating oil. That amounts to half a million homes, mostly in rural areas. This compares with around 3% of households in England.

The price of oil in Northern Ireland has rocketed. Figures released by the Consumer Council last week show that the average cost of 900 litres of home heating oil in Northern Ireland has risen to £923.34, up by more than 51% from £472.27 12 months ago. Further, the price has gone up by £50, from £873.31, in just seven days. The noble Baroness, Lady Young of Old Scone, alluded to the £100 support for heating oil. This is particularly relevant to the debate we are having today because, as it stands, the Government are promising to support home heating oil customers in Northern Ireland with a mere £100 payment in the form of a credit to electricity bills—half of this has now been wiped out in the space of a week. This is simply untenable.

At current prices, £100 would pay for a meagre 80 litres of oil, which will not last long and is too small an amount for many suppliers to agree to deliver in the first place. Further, no mechanism is yet in place to even get this money to Northern Ireland consumers, given the absence of an Executive at Stormont. I appeal to the Minister, who we all know is a fair and decent man, to use his good offices to make the case for a rapid rethink on this aspect of the Government’s plans, because the people of Northern Ireland are struggling more now than at any point over the past 25 years.

I am also concerned that the support the Government is offering, both to households and to businesses, will last for only six months. I am well aware that a review with new arrangements is due to be in place by April, but I fear these will be even less generous than those intended to carry the country through the winter, and as I have sought to make clear, in relation to Northern Ireland, they are not generous at all. This is causing great concern for many of my fellow citizens in Ulster. I appreciate that the new review will, of necessity, take a certain period of time, but I appeal to the Minister to urge his colleagues to come to some sort of decision, which must be subject to proper scrutiny by your Lordships and the other place, as a matter of utmost urgency.

This is not the time to dwell upon the arguments for why the ill-advised Northern Ireland protocol is doing so much damage to everyday life in the Province, with businesses facing increased costs and consumers having to cope with a reduced choice of goods and higher prices due to fewer suppliers. However, we do need the sea border to be removed and Northern Ireland’s position as an equal part of the United Kingdom to be fully restored. Yesterday, the Secretary of State for Northern Ireland, Chris Heaton-Harris, made clear that he intends to trigger a new set of elections to Stormont to try to break the logjam if the DUP continues to refuse to take its seats in the Executive. I see little good or little change coming from this proposed election, although my party, the Ulster Unionist Party, will, as always, fight these elections vigorously should they be called.

I urge the Government and the European Union to work together to properly address the problems the protocol is causing. Equally, I ask the Minister and his colleagues, including the Prime Minister herself, to take a more active, personal interest in Northern Ireland and its people. There is a lack of political direction in the United Kingdom at the moment, we all know that, and nowhere more so than in Northern Ireland, which has been without a functioning Government for most of the year. This would not be accepted elsewhere in these islands, and leadership is urgently required in the Province as the cost of living crisis tightens its vicious grip.

After all that, I support the Bill and look forward to the Minister’s thoughts.

Photo of Lord Grantchester Lord Grantchester Labour 6:27 pm, 19th October 2022

This Bill comes very late in the present predicament. A poor track record of government action and wrong priorities has brought about a vulnerability to energy shocks, going back to the short-sightedness of the Cameron Government in curtailing wind and solar renewables in 2015.

I welcome the comprehensive nature of the Bill, providing support across domestic users, businesses and charities—all types of users and circumstance facing unprecedented price challenges—but, in doing so, the Bill gives vast new powers to the Secretary of State to intervene in the market. While this is emergency legislation, it is regrettable that your Lordships’ Secondary Legislation Scrutiny Committee has yet to be able to report, while the Delegated Powers Committee could concentrate on only three significant delegations of power, which seem to have been ignored from earlier reports on the delegation of functions.

That there are sunset clauses, to which other speakers have drawn attention, is less than comforting; it highlights the seriousness of the review the Government must undertake and be accountable on before introducing the next stage of measures to follow in April 2023.

As I am in the gap, I will limit my remarks to one or two issues also highlighted throughout the debate. I thank the Minister for the meeting he conducted yesterday on the Bill. In his reply, can he say something about the Government’s outlook regarding the continuation of the tariff cap legislation, pending the sunset of the tariff cap Act of 2018? The Energy Bill has now been paused for the passage of this Bill. In so far as this Bill picks up these provisions, the calls for reform of many of the tariff cap provisions and the operation of Ofgem have become issues of concern. Can the Minister outline how the emergency nature of the present situation will give way to more orderly regulation of the market? At the moment, there is no competition and no switching between suppliers as energy contracts expire, as quotes from new suppliers have ceased.

The second feature I will highlight is the discrepancy in treatment between sources of power. The upstream measures for oil and gas companies that allow the off-setting of the energy profits levy for investment are in contrast to downstream measures on renewables and their surrogate levy—reinvestment there is vital and necessary, but they have not been given equal treatment. This gives a perverse incentive to continue with fossil fuels and carbon-emitting sources of energy.

As the Bill gives powers to the Secretary of State to vary contracts retrospectively on both earlier contracts under the renewables obligation and later contracts varying the contracts for difference into cost-plus, can the Minister explain why the Government have not introduced clauses giving incentives on an even-handed basis? Why do they not review the MER—maximising economic recovery—provisions? They should prioritise the development of renewables, which is where growth will come from for the long-term future of the UK.

The supply chain of renewables and energy-efficiency measures, also vital under ECO4, cannot simply be turned on again after the way it was treated—being shut off during previous government interventions. The climate emergency and net-zero imperatives remain the long-term energy challenge.

Photo of Lord Teverson Lord Teverson Liberal Democrat Lords Spokesperson (Energy and Climate Change), Chair, EU Environment Sub-Committee, Chair, EU Environment Sub-Committee 6:32 pm, 19th October 2022

My Lords, I once again declare my interest in the energy storage industry. What a Bill—it seems we are all agreed on what we are trying to do, but none of us agrees on how we are going to do it. Yet we have this very short timetable to complete the Bill, effectively now on Tuesday, although it was going to be Monday.

We have had a big break since the Energy Bill, which has somehow disappeared before it got to my best amendments, so I am extremely disappointed personally that it has been postponed. However, I spent my time well over our various recesses with my chainsaw, sawing up all my homegrown logs—they are three years old, so low-particulate. I spent a lot of time on that and am pleased to say that the Teverson household has not yet turned on our central heating. I hope to get beyond that critical date of 22 October when everyone switches it on.

It is interesting that, apart from the Minister, we have not had a contribution from the Conservative Benches tonight, although they have a past Energy Minister on their Benches, the noble Lord, Lord Marland, whom I enjoyed working with during the coalition Government.

A number of themes have come out clearly this evening. The most powerful, from the Delegated Powers Committee, is the huge range that the Government and the Secretary of State have been given here. Clause 22 was mentioned, but I particularly looked at Clause 13(2), which says:

“The Secretary of State may take such other steps as the Secretary of State considers appropriate in response to the energy crisis.”

I was thinking about what that could include. The most obvious step, given one of the main sources of energy price increases, would be to declare war on the country that is causing us this problem. That power seems to be in the Bill. I assume, despite the chaos of the Government at the moment, that will not take place. It illustrates the huge powers that are in the Bill.

I refer specifically to amending licences. I do not think this has been mentioned in the debate although many noble Lords have mentioned powers more generally. I would be interested to understand from the Minister why that particular power is in the Bill because, despite all the advice we have from energy companies, this is the one that seems to move away from the neutral, reliable, regulatory system that we have and seems to breach it. I would be interested to understand why that is included.

We heard also from many Members of the House—the noble Baroness, Lady Hayman, for instance—about the discrimination that there seems to be between renewables and the fossil fuel industry, both in terms of the way they are treated and whether the cost-plus revenue limit is a tax. It is obvious that it is really, but it does not have the ability to bring back money for investment in the industry. There is a difference in those schemes, with the fossil fuel scheme lasting until 2025, I think, and the powers in terms of the renewable sector until 2027. Why is that there? It is inconsistent and goes against government policy, or certainly declared government policy, and perhaps the Minister could explain that further.

We have little information about the cost-plus revenue limit itself. There are great powers for Ministers again. There has been very little consultation. I understand the consultation is still to happen. Perhaps the Minister could tell us what the timetable will be on that: will it be microseconds, hours, or maybe even reach to days? It would be useful to understand something that is so important.

I was pleased to hear from the noble Lord, Lord Rogan, about the £100 payment because I was not aware of the situation in Northern Ireland. I am not on a gas system myself, but in England most people are. It was a very interesting point. I do not fully understand the £100. We all know that if you put a round number in a bill, it is a made up number—that is where round numbers come from. If you have any sense, you put it at £98.20 or £102.50, to convince us that there is some science behind how that amount was reached. I would be interested to understand where that comes from. I think it really does discriminate against a lot of rural Britain that is not able to plug into the gas network, as many people say.

I am a great supporter of contracts for difference. They have been a saviour in many ways. They were introduced during the coalition Government, they are well supported by the present Government, and they seem to offer fantastic balance between fairness in terms of cost and certainty in terms of investment. They have worked well. I like the idea of trying to transition many other power producers on to CfDs. We have here a voluntary mechanism to be able to do it. I understand that one of the selling points the Government are giving this is that it takes out risks or gives certainty, but I still find it difficult to understand why organisations or companies would make that transition. I would be interested to hear more from the Government about why that should be the case.

I will finish by saying that the one thing that strikes me most about the Bill, and this whole philosophy, is that there is not an exit strategy. There is no way out of this. The only way out is if, perchance, energy prices themselves come down in the future. There are all sorts of reasons, I hope globally, why that might be the case, but we have no assurance of it. It seems to me that the fundamental obscenity of this situation is that we are likely as taxpayers to pay altogether on the two schemes—what is in this Bill and what has come before—up to something like £137 billion in current expenditure on keeping bills down, yet our energy infrastructure in this country in terms of housing, as the noble Lord, Lord Foster, said, will be as weak and pathetic as it is now after we have spent that money. How much better it would have been if we had previously invested that money to reduce demand, yet we failed to do that. Once we get through this winter cycle, or maybe the one after, or the one after that, we will still have the same inefficient energy structure in this country that we had before. To me, that is the greatest challenge.

The Bill is needed, but the way it is implemented is far from perfect.

Photo of Lord McNicol of West Kilbride Lord McNicol of West Kilbride Deputy Chairman of Committees 6:41 pm, 19th October 2022

My Lords, I thank all noble Lords who have participated in this Second Reading; there have been thoughtful and detailed interventions across the House. These Benches welcome the Bill and will support its passage. However, as raised by my noble friend Lord Lennie in his opening remarks, there are a number of issues we would like to see revised, revisited and resolved. I think the deadline for amendments is tomorrow evening, and we will be working with colleagues across the House to bring forward some detailed amendments which will improve the Bill, as your Lordships’ House always does. I will not repeat my noble friend Lord Lennie’s concerns about the Government’s wider conduct around bringing it here, but I repeat the concerns he and others have with the Bill itself. While it is welcome, it is certainly not perfect, and we truly believe it can be improved in a number of ways.

Families and businesses alike are feeling the hardest pressure as we enter the winter, and the Bill and the measures within it are therefore welcome. Reflecting on the measures themselves, there are a number of deficiencies when compared with the package that the Labour Front Bench in the other House initially proposed—a package, I note, that the Government get closer to day by day. Why not save us all a little bit of time and move to that now?

First, capping the unit price means that prices will still rise by £129, even when taking into account the £400 of support, and many households will pay a lot more than the typical £2,500 figure that the Government keep repeating. Ultimately, 10 million families will spend more than 10% of their income on energy.

Secondly, as we have heard from across the House, the one in six households that use off-grid energy sources for their heating will get little or no support, in stark contrast to the average £1,000 of support they would have got from Labour’s plan. The 4 million households with prepayment meters get no additional support, even though they use 60% of their energy over this period. These families will be spending these long, cold months unsure whether they will be able to keep their homes warm on a day-to-day basis.

Then there is how it will be paid for. Once again, I will not repeat too much of the contributions from my noble friend Lord Lennie and others, but it is clearly bizarre to avoid calling it a “windfall tax” for political reasons. I am not sure it matters what you call it—targeted interventions, periodic payments, an excess profits levy—because it sounds like a windfall tax and it acts like one.

More importantly, not prioritising cheap, homegrown, low-carbon power in favour of expensive, insecure fossil fuels is just not sensible, as we have heard. Onshore wind and solar are being treated as the whipping boy of the industry, shouldering an unfair proportion of the costs while other renewables are protected.

The Government have set out no detail on how the level of the cap will be decided, massively denting investor confidence. There needs to be clarity that the UK will not set a cap which puts us at a disadvantage against the EU equivalent and certainly not higher than the equivalent measures in the oil and gas sector. The windfall tax must be set at a level to contribute significantly to the price support for businesses and consumers—an eye-watering amount, as we heard from the noble Lord, Lord Teverson. The Government must end the absurd multibillion-pound loophole for oil and gas companies on reinvesting. Above all, it needs to be fair to consumers.

There is a vast range of powers contained in the Bill. The Delegated Powers and Regulatory Reform Committee, or DPRRC, has understandably not had enough time to look at all the powers in the Bill in detail, but it is disappointed by the decision to provide in Clauses 9, 11 and 22 powers that it finds inappropriate. Inappropriate: it does not come much clearer than that.

It said that the power in Clause 22 allowing the Secretary of State to give a direction to any energy licence holder or the Northern Ireland regulator needs to be fully explained, as the noble Lord, Lord Rogan, asked. Ministerial decisions need to be subject to parliamentary scrutiny and should be sunsetted commensurate with the other time limits in the Bill—five years is just too long.

The Minister said in his opening speech that the concerns expressed in the DPRRC report needed to be balanced with the needs of consumers benefiting from this Bill. He is right, but we on these Benches believe that there is a way through this that does not have a contradiction. We will bring forward amendments tomorrow which we will discuss on Monday in Committee and on Report.

The Minister will have received representations from industry. Many of its issues have been raised this afternoon. The noble Baroness, Lady Worthington, and others touched on them, but I will quote one:

“Our concerns are not linked to the substance of the policies outlined within the Bill but to the unprecedented and open-ended powers the Bill would confer upon the current and future BEIS Secretary of State without sufficient recourse to Parliament.”

With the changing political winds, you may ask why we on these Benches do not just keep quiet and let this go through. The reason is simple: we believe in parliamentary scrutiny and the benefits it brings to legislation and departmental and ministerial decisions. As the noble Baroness, Lady Worthington, the right reverend Prelate the Bishop of Manchester, my noble friends Lady Young of Old Scone and Lord Liddle, and others have asked, will the Government look again at these clauses?

Similar to the emergency legislation passed during Covid, this legislation gives the Secretary of State powers to extend provision on a rolling basis every six months at a time when investment in our own homegrown energy generation has never been more crucial to UK energy security. The unintended consequences of this Bill for investment could be far and wide-ranging.

We will of course look at all of these issues in more detail in the remaining stages on Monday, so I will finish off by briefly saying that the most important thing to come out of the Bill is not what is contained within it or the issues with those measures but the lack of a long-term plan that it signifies. The Bill’s solution to the problem of some renewable and nuclear electricity generators making windfall profits because of the way they price their electricity, where it was contracted under the renewable obligation arrangement and pegged towards expensive gas, is a short-term fix. There is no long-term solution in the Bill; or, as the noble Lord, Lord Teverson, said, there is no exit strategy. We would include powers to solve this problem in the long term by delinking the price of low-carbon power from that of gas for good. Unless the Government dramatically change course on their fundamental approach, we could face similar crises in the years ahead.

What we need is a sprint towards green energy—towards solar, wind, hydrogen and nuclear—and, as the noble Lord, Lord Foster, said, energy efficiency. I know that the Minister often talks about an energy mix, and again, he is right, but it is about prioritising those sources over oil and gas. Not pushing forward with these over the last 12 years has significantly raised bills and imports, and undermined our own energy security, contributing to the crisis we are facing today. We cannot let this be repeated. It is time for change.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy) 6:51 pm, 19th October 2022

I thank all noble Lords for their contributions to this important debate today. I will respond to as many as possible of the issues that were raised in the time that is available to me.

I start by briefly reminding noble Lords of the importance of the Bill. Russia’s illegal war in Ukraine has led to a global energy crisis, and the Government are taking urgent action now to support households and businesses across the UK which would otherwise face significant financial difficulties this winter. I know that many speakers in the debate recognised that. This legislation will ensure that households, businesses and other bodies such as charities and public organisations—and indeed churches—receive the financial support that they need by providing the framework to deliver the Government’s energy support package. In so doing, the Bill will help drive down inflation and support economic growth.

I turn to points raised by noble Lords in their contributions. First, I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, for their letter that I received this morning on the Energy Security Bill. I will respond to them in writing shortly, but I assure the House that the government remain committed to the important measures in that Bill to deliver change in the energy system over the longer term. We have to deal with the short-term crisis but we are not forgetting the longer-term context, and many of the measures in that Bill are to ensure that changes are made in the regulations that will benefit us all in the long term.

In the meantime, we are facing a global energy crisis, and we must ensure that we prioritise delivering the measures in this Bill to provide that much-needed support to consumers. I will say a few words about why it is so important to get this legislation passed soon. I thank the noble Baroness, Lady Worthington, and the right reverend Prelate the Bishop of Manchester for raising the important issue of the speed of this legislation; I readily accept that we are going through it extremely rapidly.

Households and businesses face rising energy prices, and it is essential that this legislation and subsequent secondary legislation that will be laid under it is in place by the end of this month. This is to allow for urgent financial assistance for householders, businesses and other organisations across the UK ahead of the winter, and particularly from the start of November.

Building on the DPRRC’s report, the noble Lords, Lord Lennie, Lord Teverson, Lord Foster and Lord Grantchester, and the noble Baronesses, Lady Worthington and Lady Young, raised concerns about the delegated powers in the Bill. Again, I pay tribute to the work of the DPRRC and thank the committee for its report, which I will also respond to shortly. The Bill takes a relatively limited number of powers but I readily accept that they are broad ones. They are essential for ensuring that these crucial support schemes can be stood up at pace. The House will appreciate the speed at which this measure has been drafted. I pay tribute to the exemplary work of the officials involved in delivering it; it has involved lots of late nights and weekend working for them, for which I thank them. It is essential that these measures are delivered as intended. To be frank with noble Lords, these powers will allow us to do this with the appropriate scrutiny.

As I said in my introduction, the vast majority of the powers in the Bill are effectively time-limited through either direct sunsetting—normally, noble Lords are calling on me to sunset powers—their link to other powers in the Bill, or indeed the duration of this energy crisis. The ability to extend time limits ensures that we have sufficient scope if we need to change them over time. I assure the House that noble Lords will of course have an opportunity for further scrutiny on the details of those schemes via the secondary legislation route, much of which is subject to the affirmative procedure.

A number of noble Lords raised concerns about the powers in Clauses 21 and 22, specifically powers to modify licences and give direction; those concerns were also reflected in the DPRRC’s report. In my view, these powers are necessary to facilitate the delivery of a number of support schemes, including the Northern Ireland energy bills support scheme and the alternative fuel payment for domestic and, potentially, non-domestic customers as well. Let me make it clear to the House that, under the terms of the Bill, Clauses 21 and 22 must be used in response to the current energy crisis. Using the powers in either clause in relation to action under any of the other powers in the Bill is in effect time- limited, as these powers are themselves time-limited.

As expected, and as always happens in these debates, many noble Lords raised the important issue of energy efficiency. A crisis gives even greater urgency for action to make homes more energy efficient in order to reduce energy bills and, crucially, to tackle fuel poverty. That is why the Government are investing £12 billion in our Help to Heat scheme, including £1.5 billion to upgrade around 130,000 social housing and low-income properties in England. I was able to launch an additional £800 million of that scheme in discussions with housing associations and local authorities only last week.

The Government have also announced further support on energy efficiency through the ECO Plus measures. This scheme was announced in the mini-Budget—it is one of the few measures from the mini-Budget to have survived so far. It will help hundreds of thousands of households to reduce their energy bills by targeting that support to the most vulnerable. Of course, as it is an obligation, we will consult on the detailed policy design of ECO Plus shortly; I am sure that noble Lords who take an interest in these matters will want to contribute. We hope to have the scheme up and running by April next year.

In addition, our energy security strategy sets out further commitments to support property owners, including facilitating low-cost finance from retail lenders to help consumers upgrade their properties at low cost. This includes zero-rating VAT on the installation of insulation and low-carbon heating for the next five years. That will potentially save up to £2,000 on the cost of an air source heat pump—should the noble Baroness, Lady Young of Old Scone, want to move in that direction.

The noble Lord, Lord Lennie, and the noble Baroness, Lady Young, raised the cost-plus revenue limit. The Government recognise the importance of dispatchable and baseload generation for security of supply. The low-carbon technologies that can deliver these types of power, such as biomass and nuclear, tend to have higher input costs. This is being considered as part of the detailed policy design for the cost-plus revenue limit. We intend the limit to last only for as long as it is strictly necessary. A number of noble Lords referred to the five-year sunset provision. That would allow the Government to respond to the immediate effects of high wholesale prices on consumers while ensuring their ongoing protection if gas prices remain abnormally high for a prolonged period beyond current expectations.

Photo of Lord Teverson Lord Teverson Liberal Democrat Lords Spokesperson (Energy and Climate Change), Chair, EU Environment Sub-Committee, Chair, EU Environment Sub-Committee

Can the Minister clarify that renewables on the cost-plus, whether hydro, solar, wind, AD or whatever, will be assessed separately within those different sectors, rather than it being an across-the-board average?

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

That goes back to the point I made in my introduction. There are many different circumstances facing different providers. Some of them have pointed out quite loudly that they have sold their power in long-term contracts, et cetera, so it varies from provider to provider. However, the noble Lord gives me the opportunity to say that the precise mechanics of the temporary cost-plus revenue limit will of course be subject to a full consultation, which we will launch shortly.

The noble Baroness, Lady Worthington, raised important issues on who should bear the cost of the measures. The energy profits levy on oil and gas and the cost-plus revenue limit that have been announced for low-carbon generators will help to fund these schemes. The scale of the crisis means that the sums involved are beyond those two mechanisms so higher borrowing will be necessary to pay for this temporary support, and it is right that we use all the available tools to support businesses through this crisis and to spread the costs over time.

The right reverend Prelate the Bishop of Manchester, the noble Baroness, Lady Young

Photo of Baroness Worthington Baroness Worthington Crossbench

I am sorry to interrupt when the Minister is trying to finish, but on a point of clarification, with the profits levy, up to 85% of that tax can be defrayed by the Government investing in North Sea oil and gas, keeping us hooked on a volatile and unpredictable source of fossil fuels, whereas this cost-plus recovery has no provision for generators to invest in cleaner power. Why is there not equal treatment?

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

There are separate provisions allowing generators to invest in clean power. The aforementioned contracts for difference scheme is doing exactly that, providing the incentive for them to invest in clean power. We have increased the number of CfD rounds that we have launched. As the noble Lord, Lord Teverson, said, this has proved to be an immensely successful scheme. I pay tribute to the officials who designed it. It has been so successful that most of the rest of Europe is proposing to adopt a very similar scheme for their own wind generation. It is precisely because that mechanism exists and provides guaranteed revenue for their investments that those incentives that the noble Baroness refers to already exist.

The right reverend Prelate the Bishop of Manchester, the noble Baroness, Lady Young, and the noble Lord, Lord Grantchester, all raised important points regarding the default tariff cap. The energy price guarantee will now determine the prices that households pay for their energy. However, we are retaining the price cap to help deliver this energy price guarantee. Clause 20 will ensure that Ofgem continues to calculate the cap level to determine what it costs an efficient energy supplier to provide a household with gas and/or electricity. Of course, this will not determine the prices that householders pay, but it will enable the Government to identify what level of support is needed to deliver the prices in this energy price guarantee. The price cap is a mechanism that has been proven to prevent excessive charging and to reflect the real costs of supplying energy. Retaining it will ensure that suppliers price in line with the energy price guarantee and that public funds are used efficiently.

The noble Lord, Lord Foster, gave his view that the Bill treats renewables less favourably than oil and gas. No energy firms, however they produce, should be profiting unduly from Russia’s war in Ukraine, whether they generate low-carbon or fossil-fuel energy. Current price levels in electricity markets are far higher than any energy firm could possibly have envisaged or forecast, or would have predicted they would need, to continue investing in renewables.

Low-carbon electricity generation from renewables and nuclear will be key to securing more low-cost homegrown energy, which is why we continue to support investments in the sector. I remind noble Lords of the point I have made continuously: the schemes have been extremely successful. We have the highest proportion of offshore wind energy in Europe, by far. We have the second-highest proportion in the world, and we have extremely ambitious plans to continue investing and producing more of it, precisely because the scheme has proven so successful and is delivering much cheaper power. It is our flagship scheme and it has worked a treat, as I said—so successfully that other countries are now adopting it. In 2023, the scheme will move to annual auctions, helping to further accelerate the deployment of clean low-cost generation, which is something that I know all contributors will welcome.

The energy price guarantee and the energy bill relief scheme support millions of householders and businesses with rising energy costs. The Chancellor made clear that they will continue to do so from now until next April. Looking beyond that, I am sure noble Lords would be interested to know that the Prime Minister and Chancellor have agreed that it would be irresponsible for the Government to continue exposing the public finances to unlimited volatility of international gas prices. Therefore, it is the Government’s intention that, after this winter, support is better focused on the most vulnerable households and those least able to pay, with greater incentives to improve energy efficiency.

The noble Lord, Lord Foster, raised issues on the essential importance of encouraging solar energy use in households. I completely agree with the noble Lord. We are committed to solar power, which not only is good for the environment but at the moment represents the cheapest way to generate electricity in the UK, albeit intermittently. The British Energy Security Strategy sets out an expectation of 70 gigawatts installed solar capacity in the UK by 2035. To achieve that and meet this increased ambition, we will need a significant increase in both ground-mounted and rooftop solar in the 2020s and beyond. The noble Lord will be pleased to know that there is a healthy pipeline of ground-mounted projects, currently amounting to around 19 gigawatts across Great Britain, which either are in scoping or have already submitted planning applications.

The noble Baroness, Lady Worthington, asked me yesterday and again today about our negotiations with Norway.

Photo of Lord Foster of Bath Lord Foster of Bath Liberal Democrat

I apologise; I thought the Minister was going to continue points about solar. Before he finishes, could he respond to the question I asked on the Environment Secretary’s plans to stop further solar farms? Could he update us on that situation?

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I have referred to the pipeline of solar for which planning permission has already been granted or that is in scope. I think the noble Lord can see that there is a considerable pipeline of solar plants that are already coming on stream and that our target remains in place.

Photo of Baroness Young of Old Scone Baroness Young of Old Scone Labour

Would the Minister give way on that point? I hope we can depend on him to make the point to the Secretary of State for the Environment that, if he had a proper land use strategy, he would not have a conflict between wind farms, solar farms and agricultural land. We would have a proper planned process to use our land wisely.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I thank the noble Baroness for that point. It is now on the record, and I will ensure that it is drawn to the attention of the Secretary of State for the Environment. In answer to the point made by the noble Baroness, Lady Worthington, about our negotiations with Norway, following the successful vaccine task force, we have created a new energy supply task force under the leadership of the excellent lady Maddie McTernan. She had such success with vaccines that we have now given her an even tougher challenge to solve. She and her team are already negotiating new long-term energy contracts with domestic and international gas suppliers to bring down the cost of the intervention immediately. The Government are opening negotiations with domestic and international gas suppliers on the prospects of longer term, lower cost gas contracts.

The right reverend Prelate the Bishop of Manchester was wrong to question whether the Bill should include suspension of green levies. In fact, we have not suspended the green levies in Great Britain; £150 of the savings will be delivered by temporarily suspending environmental and social costs being passed on to consumers. They were levied on bills, but they will now be directly funded by the Exchequer under the energy price guarantee. The Whip is telling me that I am running out of time, so apologies if I do not manage to get all the remaining points in. Those costs will be transferred to the Exchequer, so they are not borne by consumers, but they are present and still funded to help us benefit from low-carbon electricity generation.

The noble Baroness, Lady Bennett, asked about community-owned energy schemes, and we recognise the role community and locally owned renewable energy schemes can and do play in supporting the UK’s national net zero targets. These projects help encourage innovation and investment as well as community engagement with the energy challenge.

The noble Baroness, Lady Young, asked about the £100 alternative fuel payment, as did the noble Lord, Lord Rogan. This is designed by reference to past increases in the cost of heating oil in the year to October 2022. We will be monitoring the price of heating oil and other alternative fuels closely in the months ahead to see whether further payments are required at a future point in time. The noble Baroness also asked about the off-grid gas consultation. As I said to her in our conversation, we consulted last year on plans to phase out the use of fossil fuel heating on the gas grid. We have not made any decisions yet on how to move forward. The noble Baroness will be the first to know when those decisions are made and announced.

If the House will permit me just a little bit of time to say something on the important subject of Northern Ireland, I would like to touch on our equivalent support for Northern Ireland, in response to the noble Lord, Lord Rogan. In the absence of an Executive, the UK Government are taking steps to ensure that households and businesses across the whole of the UK are able to access support to manage their energy bills. In doing so we are ensuring that households and non-domestic consumers in Northern Ireland receive an equivalent level of support to those in Great Britain. I am sure that will reassure the noble Lord.

To conclude, I am encouraged by the support for the Bill, and I thank, in particular, noble Lords in the Opposition for that. I realise, of course, that on all the various subjects noble Lords have many other points that they wish to make and to put forward, but I think there is general support across the House for the Bill. As always, I look forward to continuing constructive engagement as the Bill progresses through your Lordships’ House.

Bill read a second time and committed to a Committee of the Whole House.