Energy Bills Discount Scheme Regulations 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Energy Bills Discount Scheme Regulations 2023.

My Lords, these regulations were laid before the House on 25 April this year, as were the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023, the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023, the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 and the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023.

These instruments ensure that essential energy bill support continues to be provided to eligible UK businesses, charities and public sector organisations, following on from the energy bill relief scheme support, which ended on 31 March this year. Each of them is a replacement for an earlier set of regulations that implemented that original scheme. Together, they cover UK businesses that are supplied by both licensed gas and electricity suppliers and licence-exempt suppliers. They also ensure that any end user receiving energy that is supplied with the benefit of these schemes through an intermediary will get a “just and reasonable” share of that benefit. In the absence of an intervention of this kind, energy bill support would no longer be provided to non-domestic customers where they were exposed to the impact of high wholesale market prices.

The Energy Bills Discount Scheme Regulations for Great Britain, the Energy Bills Discount Scheme (Northern Ireland) Regulations, the Energy Bills Discount Scheme (Non-Standard Cases) Regulations, the Energy Bills Discount Scheme Pass-through Requirement Regulations and the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations, which I will refer to collectively as the “EBDS Regulations”, have been created under the Energy Prices Act, which the Committee will recall gained Royal Assent on 25 October last year.

The Energy Prices Act, introduced in Parliament on 12 October last year, provided the legislative footing needed to ensure that businesses across the UK receive support with their energy bills through the energy bills discount scheme. The EBDS regulations are essential secondary legislation needed to implement and operationalise the scheme. The purpose of the regulations is to provide a discount on the wholesale costs for electricity and gas supplied by licensed and non-licensed energy suppliers to eligible non-domestic customers, and to make payments to suppliers in respect of those reductions in Great Britain and Northern Ireland. To protect eligible non-domestic customers from excessively high energy bills, the EBDS will run for a 12-month period from 1 April this year to 31 March 2024.

I thank the Secondary Legislation Scrutiny Committee for reviewing these regulations. We welcome the conclusion it reached and that it took some assurance regarding the effectiveness of the energy bills relief scheme pass-through requirements. I reaffirm that we will continue to monitor the effectiveness of the EBDS and that we expect to publish a report on both the Great Britain and Northern Ireland EBDS before the end of 2024, including the effectiveness of the pass-through requirements. We will continue to review our pass-through requirement communications strategy, including reviewing guidance on GOV.UK and offering engagement sessions to ensure that intermediaries understand their obligations and that customers receive the benefits that they are entitled to.

My Lords, that is quite a long introduction, and I thank the Minister for it. I have to admit to him that I was looking around at the pictures, and thinking that it was interesting that Moses managed to base Judaeo-Christian law on 10 paragraphs, whereas here we have about 100 pages on energy. We will perhaps move on to that.

I wanted, while not trying to be disingenuous, to actually congratulate the Government on something in these particular instruments. In the instrument on heat suppliers, no. 455, on page 12, in paragraph 1E(6)(c), we actually have the court being able to apply a fine of up to £5,000 in terms of enforcement, which is how I read it. I thought, “bingo”: there is actually a way in which, when we go through all these pass-through regulations, we could actually have something which might appear like a civil on-the-spot fine, which is a way to deter or provide some jeopardy if these pass-through arrangements are not adhered to. But needless to say, in instrument no. 463, we are back to the 2% on the outstanding amount. I am not asking the Minister to go through that again, but I genuinely believe that there was a sensible solution in terms of enforcement and that sort of approach, which could have been used in the other SIs.

On the energy and trade-intensive industries, one of the sectors that is not there is agriculture. I know that the Minister has a very good relationship with Defra, but I wondered whether he could perhaps take back again the fact that the horticulture sector—poultry, I understand, as well—is equally energy intensive, yet that primary industry sector has been left out. I realise, clearly, that this SI cannot be amended to do that, but I show my regret in this context that the agricultural industry has been left out of that. Perhaps the Minister would like to offer an explanation of why.

There is a cap here, which I am not necessarily against, of £5.5 billion. Is it on a first come, first served basis, or are the Government completely assured that that limit will not be hit?

I also add my thanks to the Minister for his fulsome explanation of the regulations before us today. I think we are on record as saying that we were disappointed with the delay at the beginning, but I think we can now say that it seems as though the mechanisms are up and running, and delivering for the people who desperately need this support provided.

I do not want to go over all of the points that have been covered and raised, but I have a couple of questions, particularly with reference to the Energy Bills Discount Scheme (Non-Standard Cases) Regulations. The noble Lord, Lord Teverson, raised the agricultural sector; that is one to consider. Could the Minister anticipate whether there will be other areas coming forward that are struggling and are not covered under this provision? As we know, this area is regarded as a relatively small part of the market. “Relatively” is a very broad definition, and I would like to know whether the Government actually know the precise size of this area as we go forward.

One area that we have raised on several occasions is the whole area of implications for vulnerable customers and the provision that is laid out for intermediaries to cover. We recognise that the Government are developing a guidance and communication strategy to ensure those intermediaries are aware of their obligations, and therefore pass on the support as required.

I would like to know when further detail will be available on the guidance and the communications strategy. I still struggle to understand why customers themselves cannot be directly informed. Perhaps this is a Kafkaesque situation, where there is a facility for customers to be able to complain but if they do not know there is a problem in the first place or what the opportunities are, vulnerable customers specifically will have an issue.

As everyone knows, when you work at the chalk face with vulnerable customers, such as local authority tenants and so on, the level of vulnerability can be extreme. We need to do everything to make sure that these people are protected as far as possible. I would welcome a reflection on whether there is more we could be doing in this space. However, I welcome the fact that there is a time commitment for the evaluation report, and I look forward to an answer to the questions that I have raised.

I thank the noble Lord, Lord Teverson, and the noble Baroness, Lady Blake, for their valuable contributions. I start by saying that the Government have implemented the EBDS to protect businesses and non-domestic consumers from the volatility of the market and, of course, to deliver critical energy bill support, while also taking account of the fact that wholesale prices are now well below previous levels seen during the peak of the energy crisis. The schemes have been designed to operate robustly and guard against fraud and gaming. We will continue to monitor the schemes to ensure that this support is provided to the people and businesses it is designed to help.

I will now respond to the questions raised by both noble Lords. As the noble Lord, Lord Teverson, pointed out, the regulations require that relevant intermediaries, including landlords, claim the benefit and pass it on to end-users. Intermediaries must take all such reasonable steps necessary to ensure that they are provided with the energy bills discount scheme benefit to which they are entitled, so that they may pass it on to their end-users.

We have taken a consistent approach to determine ETII eligibility. Organisations that operate primarily within an eligible sector will be eligible for the support. This means that about 50% of UK revenue generated in the relevant period must be from activity in an eligible sector. I am sorry to tell the noble Lord that the Government currently have no plans to review the eligibility criteria for the energy and trade intensive element of the EBDS. The Treasury-led review of the energy bill relief scheme took account of many contributions from the private sector, trade associations, the voluntary sector and other types of organisations, and the list is what we ended up with following that.

Finally, I can confirm to the noble Lord, Lord Teverson, that discussions with the European Commission are ongoing, and we hope to reach a conclusion on them soon.

On Northern Ireland, I am interested to understand whether the Commission is being difficult and finding objections or whether it is just a question of it taking the time that it takes.

The noble Lord will understand that I do not want to go any further at the moment. It is a sensitive area. We are engaging in discussions with the Commission and hope to reach a decision soon. I very much hope that it is not just being deliberately difficult but is seeking the necessary reassurances with regard to the state aid regulations.

Motion agreed.