Second Delegated Legislation Committee
Tuesday 1st September 2026
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Speaker 3
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Speaker 3
I beg to move that. The committee has considered the draft Energy Prices Act 2022 extension of time limit number two regulations. It is a pleasure to serve under your chairmanship, Sir Desmond Swayne. The government acted in the autumn budget to reduce energy costs to benefit all households with a domestic energy contract. We did that by closing the Energy Company Obligation Scheme to new costs on bills, and by moving 75% of the domestic cost of the renewable obligation to the Exchequer.
Those decisions are already making a real difference. From April 2026, they took on and they took an average of £150 of costs off household energy bills, and they continue to keep bills lower than they would otherwise be. The renewables obligation exists to support renewable electricity generation through a system of tradeable certificates. The scheme is closed to new applications and the first generators will come off the scheme from April 2027. The scheme will finally close in 2037.
The scheme has been instrumental in building the UK's renewable energy sector. It supports around 35GW of generation capacity and 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. Previously, suppliers recovered all of the costs of complying with these obligations from consumers via their electricity bills. With Ofgem reflecting these costs through the price cap from the 1st of April.
The government has instead provided grant funding to electricity suppliers to cover 75% of the domestic share of these costs in Great Britain. We have also taken steps to ensure those savings are passed on for customers on standard variable tariffs. Ofgem has factored the lower policy costs into the price cap for customers on other domestic tariffs, including fixed tariffs. The government issued a legally binding direction requiring suppliers to pass through the savings in full.
The latest price cap illustrates why this action matters. On the 26th of August, Ofgem announced that the cap for the 1st of October to the 31st of December will increase by 4% to £1,723 for a typical household , driven by ongoing wholesale price volatility. As a result of the war in the Middle East, Ofgem has been clear that this increase is likely to be primarily felt on gas bills, with electricity bills remaining broadly flat.
Without the action we took at the budget. The cap would be significantly higher still. These regulations are concerned with the legal basis for continuing to deliver these bill reduction measures. Section 13 of the Energy Prices Act 2022 provides the power we are using to take these steps to reduce people's bills, but the power in section 13 is time limited and may only be extended by six months at a time. Earlier this year, Parliament approved regulations extending the power from the 25th of April to the 25th of October 2026.
The regulations before the House today extend that time limit again from the 25th of October 2026 to the 25th of April 2027. So the policy can continue without interruption. Would the
Those decisions are already making a real difference. From April 2026, they took on and they took an average of £150 of costs off household energy bills, and they continue to keep bills lower than they would otherwise be. The renewables obligation exists to support renewable electricity generation through a system of tradeable certificates. The scheme is closed to new applications and the first generators will come off the scheme from April 2027. The scheme will finally close in 2037.
The scheme has been instrumental in building the UK's renewable energy sector. It supports around 35GW of generation capacity and 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. Previously, suppliers recovered all of the costs of complying with these obligations from consumers via their electricity bills. With Ofgem reflecting these costs through the price cap from the 1st of April.
The government has instead provided grant funding to electricity suppliers to cover 75% of the domestic share of these costs in Great Britain. We have also taken steps to ensure those savings are passed on for customers on standard variable tariffs. Ofgem has factored the lower policy costs into the price cap for customers on other domestic tariffs, including fixed tariffs. The government issued a legally binding direction requiring suppliers to pass through the savings in full.
The latest price cap illustrates why this action matters. On the 26th of August, Ofgem announced that the cap for the 1st of October to the 31st of December will increase by 4% to £1,723 for a typical household , driven by ongoing wholesale price volatility. As a result of the war in the Middle East, Ofgem has been clear that this increase is likely to be primarily felt on gas bills, with electricity bills remaining broadly flat.
Without the action we took at the budget. The cap would be significantly higher still. These regulations are concerned with the legal basis for continuing to deliver these bill reduction measures. Section 13 of the Energy Prices Act 2022 provides the power we are using to take these steps to reduce people's bills, but the power in section 13 is time limited and may only be extended by six months at a time. Earlier this year, Parliament approved regulations extending the power from the 25th of April to the 25th of October 2026.
The regulations before the House today extend that time limit again from the 25th of October 2026 to the 25th of April 2027. So the policy can continue without interruption. Would the
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Speaker 3
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Speaker 3
I thank the honourable gentleman for his intervention. Just to be clear. We will make we will do this while we need to. And as soon as parliamentary time allows, we will be able to change the law so that we do not need to continue to extend. In this way. The regulations do not give the Secretary of State any new powers. They simply extend the period for which they extend the existing power may be used.
I assure honourable members that the Department is working on primary legislation to provide a more permanent solution when parliamentary time allows. The position is slightly different in Northern Ireland, where energy costs are a transferred matter for the executive, and the Northern Ireland Renewables obligation forms a smaller cost on energy bills. The Department has been supporting colleagues in Northern Ireland as they develop a comparable offer to the policy in Great Britain, following a request from the Northern Ireland Minister for the economy.
Separate regulations came into force on the 20th of June to enable the Northern Ireland Executive to deliver their comparable offer. These regulations are a straightforward extension of an existing time limited power at a time when international events continue to put pressure on wholesale energy markets. It is vital that the government can continue to deliver the bill reductions announced at the budget, while work progresses on a longer term legislative solution. I beg to move.
I assure honourable members that the Department is working on primary legislation to provide a more permanent solution when parliamentary time allows. The position is slightly different in Northern Ireland, where energy costs are a transferred matter for the executive, and the Northern Ireland Renewables obligation forms a smaller cost on energy bills. The Department has been supporting colleagues in Northern Ireland as they develop a comparable offer to the policy in Great Britain, following a request from the Northern Ireland Minister for the economy.
Separate regulations came into force on the 20th of June to enable the Northern Ireland Executive to deliver their comparable offer. These regulations are a straightforward extension of an existing time limited power at a time when international events continue to put pressure on wholesale energy markets. It is vital that the government can continue to deliver the bill reductions announced at the budget, while work progresses on a longer term legislative solution. I beg to move.
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Speaker 6
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Speaker 6
Thank you, Sir Desmond. It's a pleasure to serve under your chairmanship. And can I congratulate the Minister on her appointment as well? This amendment extends the period during which the government may exercise its existing powers under the Energy Prices Act 2022. Specifically, it extends the Secretary of State's power to fund a proportion of the renewables obligation costs attributable to domestic electricity supply from 25th of April 26 until 25th of October 2026. Through this instrument, no new powers are created.
It simply prolongs the exercise of powers at parliamentary. Parliament has already granted. The Minister has explained that the purpose of this extension is to support the government's policy of reducing domestic energy bills by transferring 75% of renewables obligation costs from consumers to the exchequer, claiming that this will reduce household energy bills by an average of £150 from April 2026. However, the measure is solely another exercise by the government in moving costs from one pocket to another.
Households may pay less through their energy bills. However, they are still expected to meet those costs through general taxation. It's also worth reminding the House of what these subsidies are. Funding. The renewables obligation provides long term support to renewable generators, with consumers now bearing the brunt of the cost. The government is not, as they're claiming, tackling the underlying drivers of high energy prices. They're simply shifting the burden from energy bills onto the public finances.
The minister speaks of a commitment to lowering household energy bills by £300, yet household energy costs are now higher than when the government entered office in 2024.
It simply prolongs the exercise of powers at parliamentary. Parliament has already granted. The Minister has explained that the purpose of this extension is to support the government's policy of reducing domestic energy bills by transferring 75% of renewables obligation costs from consumers to the exchequer, claiming that this will reduce household energy bills by an average of £150 from April 2026. However, the measure is solely another exercise by the government in moving costs from one pocket to another.
Households may pay less through their energy bills. However, they are still expected to meet those costs through general taxation. It's also worth reminding the House of what these subsidies are. Funding. The renewables obligation provides long term support to renewable generators, with consumers now bearing the brunt of the cost. The government is not, as they're claiming, tackling the underlying drivers of high energy prices. They're simply shifting the burden from energy bills onto the public finances.
The minister speaks of a commitment to lowering household energy bills by £300, yet household energy costs are now higher than when the government entered office in 2024.
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Speaker 4
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Speaker 4
Graham Stuart. I am grateful to my hon. Friend for giving way. Is. He is astonished, as I am, that the Minister. I know who is new to her post, but comes here proposing a six month extension of this movement of costs from bills to the Exchequer, and cannot tell this chamber how much money that is going to cost. It's the most basic question you would ask as a minister to get drafted, and hopefully refreshment has arrived for the minister and she will be able to tell us in due course.
But you can't turn up in this House with a proposal like this and not know the basic money that you are putting in adding to the national debt. At a time. When I read this morning, as my hon. Friend may have seen that we now have record levels of costs on those gilts , 5.88%.
But you can't turn up in this House with a proposal like this and not know the basic money that you are putting in adding to the national debt. At a time. When I read this morning, as my hon. Friend may have seen that we now have record levels of costs on those gilts , 5.88%.
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Speaker 6
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Speaker 6
thank my honourable friend he's experienced in these matters, and I'd have thought this would be one of the questions in the 101 of presenting this to the House. We are pleased to see the government finally adopt our Conservative Party policy of abolishing the carbon price support on electricity generation, but their plan for the promised £300 savings is still nowhere to be found. While labour transfers the cost of renewable subsidies onto taxpayers. The Conservative Party has set out our cheap power plan to reduce the underlying cost of energy for households.
That plan would abolish the renewables obligation altogether, accelerate the delivery of new nuclear power by cutting unnecessary planning barriers, remove VAT from domestic energy bills for three years and abolish the carbon tax. Together, these measures would reduce household bills by around £200, not simply moving costs from one bill to another. So can the Minister outline what their plan for cheap power is, and, if not, whether they are willing to accept ours as a solution? Finally, when, if ever, will households receive the £300 reduction in energy bills that was promised at the last general election? Yeah.
That plan would abolish the renewables obligation altogether, accelerate the delivery of new nuclear power by cutting unnecessary planning barriers, remove VAT from domestic energy bills for three years and abolish the carbon tax. Together, these measures would reduce household bills by around £200, not simply moving costs from one bill to another. So can the Minister outline what their plan for cheap power is, and, if not, whether they are willing to accept ours as a solution? Finally, when, if ever, will households receive the £300 reduction in energy bills that was promised at the last general election? Yeah.
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Speaker 7
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Speaker 7
Thank you very much, Mr. Speaker. It's a pleasure to serve under your chairmanship. I don't wish to detain honourable members for any longer than necessary, but it'd be remiss of me not to mention the issue of heating oil, because there are more than 22,000 households in my constituency that are reliant on heating oil, and honourable members may be aware that heating oil was never subject to the energy price cap. And we've seen over a number of years huge increases in prices, which culminated earlier this year in March, when many households saw a doubling or tripling of heating oil costs linked to the ongoing war in the Middle East and Iran specifically.
Now, I'm really pleased to support the measures outlined today , on top of the support that the government gave in March, £53 million for heating oil customers, specifically £3.5 million of which went to Norfolk County Council offering support. But what we have seen is many residents reluctant to apply for that support because it was not universal. So therefore, could I encourage the minister, and I'm delighted to see my hon. Friend in her place encourage the Minister to reiterate the government's commitment to those reliant on heating oil and outline what the government is doing to support them.
Thank you.
Now, I'm really pleased to support the measures outlined today , on top of the support that the government gave in March, £53 million for heating oil customers, specifically £3.5 million of which went to Norfolk County Council offering support. But what we have seen is many residents reluctant to apply for that support because it was not universal. So therefore, could I encourage the minister, and I'm delighted to see my hon. Friend in her place encourage the Minister to reiterate the government's commitment to those reliant on heating oil and outline what the government is doing to support them.
Thank you.
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Speaker 8
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Speaker 8
Thank you, Sir Desmond, and it's a pleasure to serve under your chairmanship. And I would also like to congratulate the minister on her new appointment. Extending the government's powers to support energy costs will be welcome news for my constituents in South Cambridgeshire, and I feel people all over the country are facing continued pressure from high bills. So we Liberal Democrats, do support this necessary extension, but we remain concerned that families and businesses are still far too exposed to global energy market shocks.
The latest tensions in the ongoing conflict in the Middle East only serve to increase volatility in energy markets, so the government's £150 reduction on energy bills was welcome. However, the increasing wholesale gas prices as a result of the closure of the Strait of Hormuz and the existing tensions between us and Iran has been the main reason for Ofgems recent 4% price cap rise, which means that the average household is now facing a further £60 a year in costs.
This extension enables the government to continue funding, as we have heard, 75% of the renewables obligation through public spending through the Exchequer rather than through energy bills. We have called for this for a long time, and we urge the Minister to go further and remove the entirety of this levy from people's bills. The 150 reduction bills also comes from the discontinuation of the Energy Company Obligation Scheme. We warned then that delays in detailing how this would be replaced would mean many households facing cold, damp homes once again this winter.
I know this is an issue of deep concern to the minister herself, but it is deeply concerning that only 5470 homes have been upgraded through the Warm Homes local grant, just 0.1% of the government's target of upgrading 5 million homes by 2030. With energy prices remaining so volatile, improving the energy efficiency of our homes is one of the best ways to reduce bills in the long term and protect households from future shocks. It's also time to provide a progressive social energy tariff for those struggling with costs.
It's time that we acknowledged energy as a basic human need, and that is why we Liberal Democrats are calling for an essential energy guarantee, giving every household a discount on the basic portion of their energy use. And this would save the typical family around £100 a year, with the least well off 20%, saving around £140. As I said, while we support this extension and the government's action to reduce some of the costs on energy bills, much more needs to be done to bring bills down and protect households from future energy price shocks.
Thank you.
The latest tensions in the ongoing conflict in the Middle East only serve to increase volatility in energy markets, so the government's £150 reduction on energy bills was welcome. However, the increasing wholesale gas prices as a result of the closure of the Strait of Hormuz and the existing tensions between us and Iran has been the main reason for Ofgems recent 4% price cap rise, which means that the average household is now facing a further £60 a year in costs.
This extension enables the government to continue funding, as we have heard, 75% of the renewables obligation through public spending through the Exchequer rather than through energy bills. We have called for this for a long time, and we urge the Minister to go further and remove the entirety of this levy from people's bills. The 150 reduction bills also comes from the discontinuation of the Energy Company Obligation Scheme. We warned then that delays in detailing how this would be replaced would mean many households facing cold, damp homes once again this winter.
I know this is an issue of deep concern to the minister herself, but it is deeply concerning that only 5470 homes have been upgraded through the Warm Homes local grant, just 0.1% of the government's target of upgrading 5 million homes by 2030. With energy prices remaining so volatile, improving the energy efficiency of our homes is one of the best ways to reduce bills in the long term and protect households from future shocks. It's also time to provide a progressive social energy tariff for those struggling with costs.
It's time that we acknowledged energy as a basic human need, and that is why we Liberal Democrats are calling for an essential energy guarantee, giving every household a discount on the basic portion of their energy use. And this would save the typical family around £100 a year, with the least well off 20%, saving around £140. As I said, while we support this extension and the government's action to reduce some of the costs on energy bills, much more needs to be done to bring bills down and protect households from future energy price shocks.
Thank you.
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Speaker 3
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Speaker 3
Thank you, chair, I think I thank honourable friends for their members for their contributions to this debate, and I'll return briefly to the points that were raised. The number one priority for this government is to tackle the cost of living crisis that people are facing. The government acted at last year's budget by taking on an average taking of an average of £150 of costs off energy bills. With those decisions now factored into bills for the years to come.
This decision was taken at the Autumn budget 2025, before the conflict in the Middle East and the subsequent increase in wholesale energy prices. As a result, households are better protected from those increases than they would otherwise have been. The rise in the price cap announced by Ofgem will be deeply concerning news for families. We will continue to monitor the situation ahead of the winter and plan for all contingencies. I recognise that some would like us to go further and immediately reducing bills in response to recent events.
One of the first steps the new Prime Minister took was to cut VAT on electricity bills. Without this intervention, the price cap figure would have been around £45 higher than announced, while the price cap on the 1st of October will increase by 4%, driven by ongoing wholesale price volatility. As a direct consequence of the events in the Middle East, it would have been considerably higher still without the ongoing effects of moving the renewables obligation to the Exchequer, which continues to suppress bills now, where impacts have been felt by those outside the energy price cap, we have acted with £53 million of support via the Crisis and Resilience Fund for Vulnerable Heating oil customers, announced in March, and I thank my hon.
Friend the Minister for South Norfolk for his question about the issue to do with the Crisis and Resilience Fund. I understand people's concern about whether they should be applying. I urge anyone who has got any concerns about their ability to afford keeping their homes warm this winter, who rely on heating oil to apply for that to that Crisis and Resilience Fund. And I will be keen to ensure that local authorities recognise their responsibilities when it comes to dispersing those those funds accordingly.
Will
This decision was taken at the Autumn budget 2025, before the conflict in the Middle East and the subsequent increase in wholesale energy prices. As a result, households are better protected from those increases than they would otherwise have been. The rise in the price cap announced by Ofgem will be deeply concerning news for families. We will continue to monitor the situation ahead of the winter and plan for all contingencies. I recognise that some would like us to go further and immediately reducing bills in response to recent events.
One of the first steps the new Prime Minister took was to cut VAT on electricity bills. Without this intervention, the price cap figure would have been around £45 higher than announced, while the price cap on the 1st of October will increase by 4%, driven by ongoing wholesale price volatility. As a direct consequence of the events in the Middle East, it would have been considerably higher still without the ongoing effects of moving the renewables obligation to the Exchequer, which continues to suppress bills now, where impacts have been felt by those outside the energy price cap, we have acted with £53 million of support via the Crisis and Resilience Fund for Vulnerable Heating oil customers, announced in March, and I thank my hon.
Friend the Minister for South Norfolk for his question about the issue to do with the Crisis and Resilience Fund. I understand people's concern about whether they should be applying. I urge anyone who has got any concerns about their ability to afford keeping their homes warm this winter, who rely on heating oil to apply for that to that Crisis and Resilience Fund. And I will be keen to ensure that local authorities recognise their responsibilities when it comes to dispersing those those funds accordingly.
Will
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Speaker 3
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Speaker 3
I thank the honourable gentleman for giving way and for his intervention, and I'm sure we will continue to have conversations about this particular thing. Absolutely. Our manifesto commitment is to make sure that we have energy bills lower in the future. We also have to be honest about how we and how we manage external external shocks to our system and make sure that we are protecting our customers and consumers from those external shocks.
That is one of the reasons why we have the clean air, the Clean Power plan that we have, and why we are looking to reform the market over time so that we are not exposed to those kind of global shocks which push up the prices, as we have seen most recently.
That is one of the reasons why we have the clean air, the Clean Power plan that we have, and why we are looking to reform the market over time so that we are not exposed to those kind of global shocks which push up the prices, as we have seen most recently.
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Speaker 4
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Speaker 4
Absolutely most generous. I didn't ask about protecting consumers from energy price shocks. I was asking the minister about a clear, unequivocal manifesto pledge to reduce household energy bills by £300 and she, like her predecessors, refuses to address it directly. It was a clear promise she was, and her colleagues were elected on the basis of delivering that. This government is not delivering, that it is delivering higher bills at a time when people are struggling with their household finances and they demand and expect from ministers in that government to account for that promise and tell us whether it will be delivered and if so, how?
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Speaker 3
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Speaker 3
thank the honourable gentleman for his intervention. I think it's very clear. As I said before, we absolutely stand by our commitment. The previous Energy Secretary did say bills are too high, and we stand by our promise to get bills down by up to £300 by 2030. We have already taken £150 off bills as a consequence of the decisions that were made in the previous budget. The new Prime Minister has announced a £45 reduction on average across an energy bill because of the reduction in VAT.
The Independent Resolution Foundation found that across 2026 as a whole, the typical energy bill is now expected to be around more than £200 lower in real terms than in 2024, before the conflict in the Middle East began. I understand the honourable gentleman knows a lot about the energy system and will, and therefore I respect his understanding, too, that when there are global shocks like there are, we have to do everything as a government to protect consumers from those global shocks.
That is, in the short term, with the kind of efforts we put in now and the long term in terms of reforming the market, I look forward to seeing him supporting our reform of that market in order to be able to protect consumers in the future. Chair. Chair. The UK has a diverse and resilient energy system. Indeed one that my. That the honourable gentleman oversaw for some time. And we will, of course continue to monitor the situation in the Middle East closely.
I can assure colleagues that contingency planning is taking place for every eventuality to ensure the government can be responsive and responsible. I think it is important for us to understand that we need to have a principled reform, to shifting the balance of costs of levies from the Bill to to the Exchequer, because we need to make sure that that is a fairer way of dealing with the costs of a shift to a cleaner and more resilient energy system.
The reasons we have given for not abolishing the renewables obligation, which I know is one of the suggestions from the party opposite, is the fact that it would significantly impact on investor confidence and indeed on energy security. There is a risk that there will be no certainty that 25,000 renewable energy projects would continue generating. Without that subsidy. I am sure that the His Majesty's opposition would not want to have a set of policy proposals that would threaten the security of our energy system in that way.
Members. These regulations extend a time limit on essential legal powers, which enable us to take action to reduce people's energy bills. While simple in themselves, the regulations support the reduction of people's energy bills, which is a key part of this government's focus on the cost of living. I beg to move.
The Independent Resolution Foundation found that across 2026 as a whole, the typical energy bill is now expected to be around more than £200 lower in real terms than in 2024, before the conflict in the Middle East began. I understand the honourable gentleman knows a lot about the energy system and will, and therefore I respect his understanding, too, that when there are global shocks like there are, we have to do everything as a government to protect consumers from those global shocks.
That is, in the short term, with the kind of efforts we put in now and the long term in terms of reforming the market, I look forward to seeing him supporting our reform of that market in order to be able to protect consumers in the future. Chair. Chair. The UK has a diverse and resilient energy system. Indeed one that my. That the honourable gentleman oversaw for some time. And we will, of course continue to monitor the situation in the Middle East closely.
I can assure colleagues that contingency planning is taking place for every eventuality to ensure the government can be responsive and responsible. I think it is important for us to understand that we need to have a principled reform, to shifting the balance of costs of levies from the Bill to to the Exchequer, because we need to make sure that that is a fairer way of dealing with the costs of a shift to a cleaner and more resilient energy system.
The reasons we have given for not abolishing the renewables obligation, which I know is one of the suggestions from the party opposite, is the fact that it would significantly impact on investor confidence and indeed on energy security. There is a risk that there will be no certainty that 25,000 renewable energy projects would continue generating. Without that subsidy. I am sure that the His Majesty's opposition would not want to have a set of policy proposals that would threaten the security of our energy system in that way.
Members. These regulations extend a time limit on essential legal powers, which enable us to take action to reduce people's energy bills. While simple in themselves, the regulations support the reduction of people's energy bills, which is a key part of this government's focus on the cost of living. I beg to move.
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