Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026.

My Lords, these draft regulations were laid before the House on 8 June and, in case noble Lords think we are suffering from a small dose of déjà vu, similar regulations, which we debated at the time, were laid months ago for reasons that I will come to in a moment. Further regulations were laid concerning Northern Ireland a little while after that.

As the background to this SI, the Government acted in the Autumn Budget to reduce electricity costs to the benefit of all households with a domestic electricity meter by scrapping the energy company obligation— ECO—scheme and moving 75% of the domestic costs of the renewables obligation to the Exchequer. We have been able to provide immediate savings for households in kind. These actions also mean that the energy price cap grew by less than it would otherwise have done on 1 July this year.

On 27 May, Ofgem announced that the price cap level for the period from 1 July to 30 September would be set at £1,862—an increase of £221 from April. The changes that we made at the Autumn Budget are still factored into bills and, without that action, the price cap would be significantly higher.

This concerns the transfer of 75% of the levies on the renewables obligation scheme to the Exchequer. The renewables obligation scheme exists to incentivise UK renewable electricity generation through a system of tradeable certificates. Of course, it is not a current scheme—it closed to new applications in 2017—but existing sites will continue to receive support until the scheme ends in 2037. The scheme has been instrumental in taking a nascent renewable energy sector to where it is today, with the scheme supporting around 30% of total UK electricity generation.

The core of the renewables obligation scheme is a process in which electricity suppliers purchase certificates from renewables generators. This process continues unchanged. However, previously, suppliers ultimately recovered the costs of complying with their renewables obligations from consumers via electricity bills. Ofgem considered these costs when setting the quarterly price cap for domestic consumers in Great Britain.

I thank the Minister for presenting the regulations before us. I express the hope that he stays in his position, as indeed does the Whip. We do not like changes in the House of Lords.

I will make a couple of comments. Eons ago, I served as the shadow Environment Minister on an energy Bill in 2006 or 2007, I think it was, so plus ça change, plus—or rather, the more things change, the more they stay the same. I do not know how Hansard will cope with a French quotation so I will not say it.

What the Minister has put before us just confirms that this is smoke and mirrors. We are all playing for what is, in effect, a subsidy, and this has been the case since the mid-2000s, when his Government introduced this type of policy. Instead of me, as a householder, paying my household electricity bill, I am now paying it as a taxpayer, through my general taxation. I just hope the Minister and the department will step back from saying that this is a reimbursement or a return to me of £117, because that is not the case.

Where the department and the Minister could make a difference is by reducing the standing charge, as Martin Lewis, the money-saving expert, has said on many occasions. I know it has been outside the remit and the purport of the statutory instrument, but I just make a plea to the Minister, who has now disappeared behind the Dispatch Box—I cannot see him any more. I think he is still there.

I think that, in fact, our government lectern is higher than the opposition lectern.

For very good reason.

As we are all about the same height at this end, we do not need it. We should not worry about that.

Can the noble Lord write to me—I have asked this on more than one occasion—to tell me whether he, the department and the Government are inclined to look into this? From the point of view of household energy bills, that would make a real difference. If we could move away from renewables so that the application for the BESS in Knaresborough and Scotton is not approved next week, that would make the world a safer place, because my niece has been told that she will have to evacuate in the event of a fire. Knowing how highly combustible and flammable these things are, the world would be a safer place. However, with those few remarks, obviously I approve the SI before us this afternoon.

My Lords, I thank the Minister for the way in which he introduced these regulations. It is almost like double déjà vu because we have considered the Northern Ireland regulations and we considered these ones very recently. We had a good debate on them last time, so I will be incredibly brief on these. I sincerely hope that the Minister stays in post, because I enjoy working opposite him.

On the regulations, the Government need go on seeking these six-month extensions so that they can continue to deliver these savings, which are important at the moment. We have renewed hostility in the Middle East and increased pressures on the cost of energy, so we absolutely recognise the need for this to be done, and these regulations would extend those provisions from 25 October 2026 until 25 April 2027. I therefore recognise that, in the absence of other primary legislation, there is a need continuously to come back with the six-month extensions.

I welcome that the noble Lord said that his department was working on bringing forward a permanent legislative solution so that we do not need to continue doing this. Can we expect that in the energy independence Bill, or is the expectation that it would need to be a stand-alone piece of legislation?

I made all the broader points I need to make on this SI when we debated it previously, so I will not rehearse those again. The Minister knows where I stand on a need to reduce energy costs, and on some of the ideas that I believe in and which my party has put forward. I wanted to ask about the situation in Northern Ireland, on which the Minister kindly updated us. I welcome that his department has been working with the Northern Ireland Executive, and I hear what he says: that has been enabled and has entered into force. If there is anything else on the Northern Ireland situation that the Minister might choose to add, that would be welcome. Other than that, we support these regulations, we will not stand in their way, and I thank the noble Lord.

My Lords, I declare my interest as chairman of both Amey and of Acteon subsea engineering company, which works on offshore wind and oil and gas around the world, and as chairman of Buckthorn Partners, all of which are involved with energy transition.

I am very grateful to the Minister for the introduction of what is, I hope, the last SI before the Recess. I echo the comments made by my colleagues about the way he always handles the Committee with respect and responds to as many questions as he can in the time available.

I hope that the Government will not continue to keep propping up the renewables obligation to the Exchequer with secondary legislation. The point has been made that it is also important that we have proper scrutiny of it through the introduction of primary legislation. I say to my good friend, the noble Earl, Lord Russell, who is the Liberal Democrat spokesman, that I have no doubt that there will be plenty of room to handle this matter in the so-called energy independence Bill. It is fast becoming a Christmas tree Bill. I would not want to be on that Bill Committee; it must be the worst job in DESNZ at the moment, because it is being written and rewritten. I hope that the clauses about banning licensing in the North Sea have now been removed, in advance of the new government leadership—we will see shortly—but this would be a good opportunity for this specific point to be remedied in primary legislation.

The Secondary Legislation Scrutiny Committee noted that the Government’s estimated saving of £150 on energy bills from their RO to the Exchequer policy would be less impactful following the conflict in the Middle East. Although the Opposition support the principle of reducing policy costs, we firmly believe that the way to do this, as the Minister has heard me say on many occasions, is by removing policy costs, not transferring them to general expenses, as my noble friend said in her excellent speech.

Let us say that, due to the current market volatility, the wholesale price of electricity is, on average, £100 per megawatt hour. The cost of ROCs is around £70. Generators will receive this wholesale price in addition to the number of ROCs by the band in which they fall. Offshore wind farms will receive almost three times the wholesale price, or £240 per megawatt hour. Onshore wind farms will receive almost double: £170 per megawatt hour. Solar farms will receive one to two ROCs per megawatt hour, and so will get roughly double the wholesale price. These are all costs that are passed on to consumers. Whether the Government or energy suppliers pay the upfront fee to Ofgem is irrelevant; it is the British public who are funding it. As my noble friend rightly said, shifting costs to make it appear as if the British people are paying less is a disingenuous sleight of hand. The money will continue to come out of the common purse until policy costs are altogether rethought.

Let us say that, due to the current market volatility, the wholesale price of electricity is, on average, £100 per megawatt hour. The cost of ROCs is around £70. Generators will receive this wholesale price in addition to the number of ROCs by the band in which they fall. Offshore wind farms will receive almost three times the wholesale price, or £240 per megawatt hour. Onshore wind farms will receive almost double: £170 per megawatt hour. Solar farms will receive one to two ROCs per megawatt hour, and so will get roughly double the wholesale price. These are all costs that are passed on to consumers. Whether the Government or energy suppliers pay the upfront fee to Ofgem is irrelevant; it is the British public who are funding it. As my noble friend rightly said, shifting costs to make it appear as if the British people are paying less is a disingenuous sleight of hand. The money will continue to come out of the common purse until policy costs are altogether rethought.

With the combination of high subsidy schemes and high constraint payments to renewable generators, as well as the Government’s refusal to increase domestic oil and gas production in the face of international turmoil, the Government are voluntarily increasing people’s energy bills. Regardless of where the subsidy is paid from, the British public will foot the bill. On top of that, wind farms are paid more than £200 per megawatt hour, even when they are not powering the grid; indeed, they are paid to turn off when transmission capacity is full.

The intermittent nature of renewables and our current capacity issues mean that we still rely on oil and gas prices—prices that, even during a war, are still cheaper than renewables with the government subsidies. The Government have the chance to make oil and gas even cheaper yet. However, the Secretary of State refuses to back domestic fields and approve production at Jackdaw and Rosebank until after he leaves office. Whether he will have to do it in No. 11 or will go on to the Foreign Office and avoid the issue are interesting questions. If he becomes Deputy Prime Minister, he will certainly have collective responsibility.

We understand that Jackdaw will be approved—that is very good news indeed—but it will take more than just announcing Jackdaw for Andy Burnham, who is destined to go to Aberdeen during the Summer Recess, to persuade the people of Aberdeen. I hope that he will have more to offer them than Jackdaw. This country needs Rosebank for energy security and needs a licensing round to make us more energy independent. I have to say, calling a piece of legislation the energy independence Bill—that is, as I understand it, the name that has been chosen by the department—must be one of the greatest misnomers in parliamentary history, because it is completely an energy import-dependent Bill, but we can deal with that in Committee when we come to considering the naming of the Bill as the final item in our legislative debate.

The reality is that we need to look carefully at the implications of the repetitive SIs that are coming before us. Interestingly enough on this one, two phrases caught my eye. One is that

“there could also be an increase greenhouse gas emissions through the rebound effect on energy consumption”