Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026

Lord Ashcombe Excerpts

Monday 13th April 2026 Grand Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

My Lords, these draft regulations were laid before the House on 23 February and consist of an extremely short SI—six lines altogether—and a very slight amendment of a date from 25 April 2026 to 25 October 2026. I am sure noble Lords will be eager to know why that change of date is being undertaken. On 1 April, typical household energy bills reduced by more than £100, thanks to action this Government took following the Budget. Energy bills are lower than they were in March because of the choices made by the Chancellor last year. They will remain capped at this level until July.

I want to be clear what lies behind the reduction in energy bills from 1 April. First, we have taken the considered decision to bring the energy company obligation scheme to a close, removing its costs from bills and instead funding future energy efficiency home upgrades via public investment in the warm homes plan. Secondly, we are moving 75% of the cost of the renewables obligation scheme attributable to domestic energy supply to the Exchequer. These principled reforms shift the balance from levies on bills to public spending. These regulations support that reduction in energy bills by ensuring that the Government retain the necessary power for the renewables obligation cost transfer.

The renewables obligation scheme exists to incentivise UK renewable energy generation through a system of tradeable certificates. The scheme closed to new applications in 2017, but existing sites can 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 renewable generators. This process continues unchanged.

However, previously, suppliers ultimately recovered the cost of complying with their renewable obligations from customers via energy bills. Ofgem considered these costs when setting the quarterly price cap for domestic consumers in Great Britain. From 1 April, the Government are instead providing grant funding to electricity suppliers to cover 75% of the cost of these obligations attributable to domestic energy supply in GB. We have given a legal direction to electricity suppliers, requiring them to pass these savings on to domestic consumers. Ofgem has also reflected the reduced cost in the lower price cap from 1 April. At the Budget, we committed to keep these costs off bills until 31 March 2029.

I hope noble Lords will agree that these are good things to do concerning energy price costs and the reduction of customers’ bills. But, of course, there must be a legislative basis for those changes. The legislative basis for the grant funding that enables the energy bill reductions I have mentioned is currently set to expire on 25 April this year. These regulations, as I have mentioned, extend this time limit to ensure that the removal of costs from electricity bills can continue. We can extend the time limit on the legislation—the Energy Prices Act 2022—by only six months at a time. The extension in these regulations is until 25 October, when the Bill is in effect re-sunsetted.

I therefore expect to return to the House in October to seek a further extension on that sunset clause, but I assure noble Lords that the department is working on primary legislation to provide a more permanent solution, which will be taken forward 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 electricity bills. The department has been supporting colleagues in Northern Ireland as they develop an offer comparable to the policy in Great Britain. Following a request from the Minister for the Economy in Northern Ireland, we laid separate regulations in March to support their delivery, which I hope to bring before your Lordships shortly.

In concluding, I thank the Secondary Legislation Scrutiny Committee for noting these regulations as of interest in the context of events in the Middle East, which the department continues to closely monitor.

Energy company obligation costs and 75% of renewables obligation costs have been removed from average domestic energy bills and will stay off bills for at least the next three years. Whatever challenges lie ahead, the Government will prioritise supporting working people with the cost of living. These regulations are ultimately a simple time-limit extension to underpin the removal of these renewables obligation costs from bills. I beg to move.

[Lord Ashcombe (Con)]

My Lords, the Energy Prices Act 2022 was brought forward in circumstances that were, by any measure, extraordinary. It was a moment of acute global volatility, when Governments across Europe were forced to act at speed to shield households and businesses from unprecedented shocks. Those conditions justified exceptional paths but, as we move further away from that crisis moment, it is right to ask whether repeated extensions of emergency measures remain the most appropriate long-term course.

Energy security today is defined not only by the balance of supply and demand over the year but by the system’s resilience at moments of stress. The Government’s own modelling makes clear that peak day gas demand remains high, even as overall annual consumption gradually declines. It is those peaks, on the coldest days, typically when the wind does not blow and the sun does not shine, and the tightest margins that test the system most severely.

In 2024, gas provided 36% of the UK’s energy needs. It is used not only in generating electricity but, importantly, in domestic and industrial heating. Domestic gas production remains a critical component of the UK energy system. In 2024, the UK continental shelf provided 43% of the UK supply, imports of liquid natural gas provided 14% and the balance was imported from Norway. It is more reliable than imported alternatives, which can always be diverted elsewhere—even the Norwegian imports—as Europe becomes ever hungrier for the same molecules. Domestic gas goes into the extensive UK network at significantly lower carbon-emissions intensity—some three times lower—than liquid natural gas, which predominantly comes from the United States, and it is far less exposed to geopolitical risk or global bidding cycles. LNG will remain an important source of flexibility, but it cannot substitute for domestic supply, particularly given the UK’s very limited gas storage capacity.

Maintaining a stable level of domestic production also sustains the essential infrastructure on which the whole system depends: the pipelines, terminals and onshore hubs that provide flexibility, resilience, affordability and, critically at this current time, jobs. Once the infrastructure and experience are lost, they will not easily be rebuilt.

More broadly, there is a strong case for moving from crisis area interventions towards stable, rule-based arrangements. Such an approach would continue to protect consumers when prices spike, while giving investors the confidence needed to support the system in more normal times. That balance between consumer protection and long-term stability is essential if we are to secure an orderly transition and a resilient energy system for the years ahead.

With these points in mind, I would like to pose four questions to the Minister. First, can he outline a clear pathway from the continued use of emergency powers under the Energy Prices Act towards a permanent, price-responsive framework that supports investment and resilience? Secondly, how do the Government intend to ensure that critical gas infrastructure remains viable if domestic production continues to decline? Thirdly, what assessment has been made of the risks associated with greater reliance on LNG imports, particularly in light of the UK’s limited gas storage and exposure to global market volatility? Finally, have the Government considered the carbon implications of increased LNG reliance, given its significantly higher life-cycle emissions compared with UK gas produced here?

[Earl Russell (LD)]

My Lords, I will respond to the Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026 and the related Utilities Act 2000 (Amendment of Section 105) Order 2026, which has already come into force as a companion SI. I thank the Minister for his introduction.

These instruments are technical and minor, but important. They enable the Government to continue to deliver support through the RO to Exchequer scheme, under which 75% of the domestic cost of the renewables obligation is funded by the Exchequer, rather than passed through to household bills. This matters because households remain under intense pressure from high energy costs at a time of renewed global energy insecurity. The renewables obligation is a legacy scheme that was closed to new generators in 2017 but will continue for existing participants until 2037. The Government’s decision, announced in the November 2025 Budget, to shift 75% of the domestic cost to the Exchequer was therefore welcome. This continuation is expected to reduce average household bills by over £100 a year. This alone will not resolve the wider cost of living challenge, but it is a sensible and pragmatic intervention.

The purpose of this statutory instrument is relatively straightforward. It extends by six months, from 25 April to 25 October 2026, the time limit under the Energy Prices Act 2022, allowing the Government to keep using these powers while legislative changes are prepared. In the absence of primary legislation, this is the only way to avoid a gap in this financial support. We therefore support the Government’s intention to maintain assistance under the scheme.

Support to reduce consumer energy bills is needed now more than ever. However, the possible need for repeated short-term extension does raise some broader concerns about timetabling and certainty. Households should not risk losing support simply because the powers needed to deliver it are temporary and expire before replacement legislation is ready. I understand that the Government expect that further instruments will be needed—the Minister confirmed this in his speech—to extend this period again. Without primary legislation in place by October, another SI will need to be brought forward. I understand that the department is working on permanent legislation, which we welcome, but this SI is in effect a short-term bridge, not a long-term permission to proceed indefinitely. It buys the Government time either to legislate or, failing that, to bring forward a further SI.

I will therefore ask the Minister a couple of questions. First, when does he intend to bring forward the proposed primary legislation? What legislative vehicle might be used: will it be the energy independence Bill? How will the department ensure that there are no gaps when temporary powers are replaced?