Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026.

My Lords, this instrument was laid on 12 January 2026. I acknowledge that the Joint Committee on Statutory Instruments has provided a helpful review of these regulations and not drawn any special attention of this House and the other place to the instrument. I acknowledge that the Secondary Legislation Scrutiny Committee has reported this instrument as of interest to Members.

This instrument delivers one of the Government’s industrial strategy commitments to increase electricity price support to energy-intensive industries—or EIIs—through uplifting the level of relief offered by one of the measures in the British industry supercharger. EIIs include foundational manufacturing sectors, such as steel, chemicals, cement, glass, electrical components and gigafactories. These sectors are critical to the UK’s long-term economic security and for the delivery of the modern industrial strategy.

The British industry supercharger was introduced in 2024 to reduce the electricity price gap between Great Britain and comparable industrial countries in western Europe, such as France, Germany and the Netherlands. The supercharger comprises three measures: the EII exemption scheme, which offers a 100% exemption from contracts for difference, feed-in tariff and renewables obligation electricity policy levies; the capacity market exemption, which offers a 100% exemption from the costs of funding the electricity capacity market; and the network charging compensation scheme, which provides 60% compensation for the EIIs’ electricity network costs.

Despite the success of these measures in delivering critical relief to industry, the Government recognised in our industrial strategy that there remains an electricity price gap between Great Britain and comparable industrial economies in Europe. This places British EIIs at a competitive disadvantage, while increasing the risk of carbon leakage and the offshoring of vital manufacturing jobs and investment.

My Lords, I am grateful for the opportunity to put a couple of questions on these regulations. Having represented a high energy user, a York brick company, for a number of years in the other place, I am well aware of the disproportionate energy costs for high energy-use industry. There is a theme here and it is put very well on page 8 of the impact assessment attached to the regulations, where at paragraph 6 it states:

“Electricity network costs paid by GB based EIIs are higher than in many other EU countries largely due to the discounts offered in some jurisdictions to EIIs that meet certain eligibility criteria regarding electricity consumption and off-peak grid utilisation”.

That explains the background neatly. Does the Minister agree that we have per se, across the board, higher energy costs in this country for both energy users and domestic users? What then concerns me is that it seems to be smoke and mirrors. If I have understood the purport and thrust of the regulations as best I can, the Government’s intention is to pass on to domestic consumers and non-domestic customers the differential between what the original costs would have been and now the reduction proposals under the EIIs and the supercharger scheme.

I am grateful to the Secondary Legislation Scrutiny Committee, which looked at this briefly. It states in paragraph 2 of the 49th report:

“The Impact Assessment estimates that some 320 EII businesses will save a total of £131 million per year because of the uplift to 90%, while average household electricity bills are expected to rise by not more than £1.50 per year.”

I pause there because that is £1.50 a year extra to what we are already paying. I understand that, at Prime Minister’s Questions today, the Prime Minister applauded the fact that the energy pricing cap will be reduced on average by £17, which all of us in the Committee would welcome. But NESTA, a government body set up to look at energy use, states, if you key in the question, “what is the cost per household of green energy projects?”:

I understand that this £17 that was taken off our bills today—well, I do not think I am covered by the pricing cap, because I am locked into whatever it is I am locked into—will now go into the general taxation pot. I accept that, if we are going to do this kind of smokes and mirrors, the money will have to come from somewhere. I realise that the £17 is not before us today, but could the noble Lord write separately on this to those of us who are participating this afternoon? That would be very helpful. That £17 is lowering the price cap, but moving to general taxation, so we will all be paying it, one way or another.

I put down a marker that I realise that, in the scheme of things, £1.50 is not large but, when it is added to what we are already paying, as highlighted by Nesta, the sum is quite large. Would it not be better to put it into general taxation? The simple reason and the long-standing argument that I have had in Grand Committee, more than anywhere else in the House, is that our standing charge is that part of the energy bill that we cannot control. The usage shown on the meter is something that we can control, but an increasingly higher proportion of all of our bills is the standing charge—the one area of the bill that we cannot control. I leave the Minister with that thought: it might be more responsible to do this in another way than by clobbering the consumer.

I am honorary president of National Energy Action, which advises the Government on the warm home discount, and I would have preferred it to have stayed at £350 to help those most in fuel poverty, rather than it to have been reduced and spread more thinly to the £150 it now is. I am grateful for the opportunity to have raised those issues.

My Lords, it is always a pleasure to follow the noble Baroness, Lady McIntosh of Pickering, who is forensic in her detail. I should say that she has somewhat mixed her drinks with this measure and other things, but this measure and her comments indicate that the energy market in this country, which this Government inherited from their predecessor, is broken, in essence, and is not working properly.

While we are talking about this particular statutory instrument, it would be useful to have an indication from the Minister that the Government understand the malfunctioning way that energy works for both and consumers, and for him to undertake a process whereby the whole thing is properly reviewed. It is quite clear that there are many pushes and pulls, puts and takes, within our energy market: some are to do with green energy and some of them not; and some are to do with the way that the overall energy cost is assessed based on a floating gas price, rather than the actual cost of the energy being generated. It would help for the Minister to indicate, on behalf of the Government, that he understands that a proper root and branch review of the way in which the energy market is structured is long overdue. I do not blame the Government for what it is now, but I would blame them if they just sat on their hands without doing something about it.

Measures to bring down some of the highest industrial energy prices in the world—if not the highest—obviously come as welcome news to those businesses that have received them. Energy-intensive industries, as the Minister said, such as steel, chemicals, glass, ceramics and brickmaking, as the noble Baroness mentioned, face much higher energy costs than competitors overseas. They really are competing with not just one arm tied behind their backs but most of their limbs. They cannot pass on these prices because of the international market in which they operate. It is welcome that these EII businesses have been recognised, but we are concerned about the lack of support for other businesses across our manufacturing and energy use sector, which includes consumer businesses and the high street.

I hate to interrupt the noble Lord but a Division has been called—

I have literally three words and then I will sit down. What about the ones with more than 50 employees? That is just the start of the problems that we have in our energy market.

That is most considerate of the noble Lord. A Division has been called in the Chamber; the Grand Committee stands adjourned until 5.02 pm.

My Lords, I am very grateful to the Minister for his detailed explanation, but it is difficult to consider this statutory instrument without reflecting on the circumstances that have made it necessary. The Government have presented these regulations as a modest and technical adjustment—an increase in the network charge compensation from 60% to 90%—but the scale of that increase speaks volumes. We are not dealing with marginal fine-tuning; we are witnessing the expansion of an emergency support mechanism designed to shield our most electricity-intensive industries from energy costs that have become structurally uncompetitive. If our electricity market were delivering affordable power to the productive economy, such levels of compensation should not be required.

The Government’s own impact assessment, and my noble friend Lady McIntosh of Pickering, have acknowledged that, even after the British industry supercharger package, UK electricity-intensive industries will still face costs of around £93 per megawatt hour, compared with roughly £60 per megawatt hour in France and Germany. I go back to the impact assessment, because the first sentence is also extremely instructive:

“Great Britain’s energy-intensive industries … continue to face some of the highest electricity prices in Europe, even after existing relief measures, due to higher network charges and policy costs compared to competitor countries”.

Those two words, “policy costs”, are extremely instructive. These charges are the result of policy choices.

A recent study by the Adam Smith Institute underlined the scale of the challenge. It showed that British businesses are paying nearly double the price of power paid by their French counterparts. The report identified as the most important factor in that disparity the United Kingdom’s reliance on what it described as

“a combination of expensive renewables and a gas backstop”.