Energy Bills Discount Scheme (Amendment) Regulations 2024

Lord Lennie Excerpts

Tuesday 12th March 2024 Grand Committee

[Earl Russell (LD)]

My Lords, this statutory instrument sets out to enable the Secretary of State to put down a date after which heat networks may no longer be able to make an application for support under the energy bills discount scheme. The EBDS was established in April 2022 to provide non-domestic energy consumers with a discount on their higher gas and electricity bills. It also gives discounts to domestic consumers on communal heat networks, who, unlike households using a normal mains electricity or gas supply, were not supported under the terms of the energy price guarantee.

Under the terms of the EBDS, qualifying heat suppliers—QHSs—are required to apply for support, which they must then pass on to the domestic customer in the form of energy bill discounts. The Minister in the other place noted:

“Without that support, domestic customers on heat networks would have been exposed to the full impact of high wholesale market prices. The support that we have provided through the EBDS regulations is estimated to be worth £180 million in total, and £1,200 for the average … customer”.—[Official Report, Commons, Fifth Delegated Legislation Committee, 5/3/24; col. 3.]


This is, if you like, the architecture that was set up at pace and at scale to deal with, as the Minister here has said, the consequences of the invasion of Ukraine, its impact on rising energy costs here and the impact of that on the cost of living.

I want to be clear that any comments I make on this statutory instrument are set against a background of welcoming all the measures that the Government put in place, at scale and at pace, to deal with those consequences in response to what was a crisis. That being said, I have some concerns about this instrument and its impacts; I am also concerned about the way in which this scheme was set up, particularly for people on communal heat networks. I also note that this instrument has been noted as being of interest by the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments.

The Government’s position is an administrative one in wanting to bring this scheme to an end. I fully understand that. The legislation, as originally drafted, means in effect that there is no end date, so, although the scheme will end, people will be able to continue to make applications for ever. That clearly has to end, so I have no disagreement there.

The intended end date is 31 March 2024. As the Minister said, there will be a two-week extension for those people who could not reasonably be expected to make an application because they hit the deadline. From a purely administrative point of view, this all seems fine and reasonable, but, from a customer’s point of view, there are impacts here. The customers we are talking about are those who are vulnerable and living in social housing.

The way in which the system was set up was not brilliant. I do not think that the operators of communal heat networks should have been required to apply in order to get the discounts in the first place. There have also been problems with pass-through to customers living in communal heat networks.

I want to ask a couple of questions before I come to an end. The end date is the end of this month, so it is literally the blink of an eye away. Why the urgency here? The Explanatory Notes say that the Government are still getting 20 applications a month. Is there the possibility of extending this?

I am concerned about what the Government are doing to inform the end-users and beneficiaries of these schemes. My thinking is that one of the reasons why this scheme was set up the way it was is that the Government do not have proper databases on the number of communal heat networks that exist, let alone the people in them. I understand why, in response to a crisis and not having those databases, the Government went down the route they did. However, I feel that this situation is likely to repeated in future. I request that the Minister and his department think again about trying to set up databases, so that the next time we are in this position, the discount on the cost of energy for people living in communal heat networks can come directly to them. That would be one point.

The numbers may not be that great, but there are still 60,000 individuals from vulnerable groups, as both committees have noticed. The cost per individual is likely to be £1,200. These are vulnerable people, and this is a big loss to them.

I note that the Government say that people can still seek redress through the ombudsman and the court system. However, that is quite slow and blunt, and applies only where owners of communal heat networks have made an application and received the funding but not passed it on to the end-user. I could find nothing in the information provided, but does the Minister know how many of those particular cases there are and what action the Government will be taking to support residents in those cases? Clearly, that is a criminal case—I am sorry if I am wrong and happy to be corrected—as the owner of a network has a discount but has failed to pass it on.

That is pretty much it from me. My real concern is that these are vulnerable people, and I encourage the Minister to do everything he can to make sure that they are supported. My real point is about learning, so that, the next time we are in this position, we can make sure that people in these situations get a better deal.

[Lord Lennie (Lab)]

My Lords, as we have heard, this instrument enables the Secretary of State to set a date after which heat networks can no longer apply for support under the energy bills discount scheme. Under the scheme, qualifying heat suppliers are required—that is the word used—to apply for support, which they then pass on to their domestic customers in the form of energy bill discounts. The Department for Energy Security and Net Zero has said that not all QHSs have applied for EBDS support. Although the scheme itself will end on 31 March, there is currently no effective date for applications to be received. The Minister has set this out—so far, so tidy.

DESNZ has estimated that 3,000 qualifying heat suppliers may not have applied for the EBDS, but we do not actually know, because there was no register of the qualifying heat suppliers. We do not know how many there are or where they are, so we cannot follow them all up. That is one of the problems with the scheme that was set up. However, we estimate that up to 60,000 domestic customers may lose out on support as a result of qualifying heat suppliers not applying for a scheme discount, as required.

As we have heard from the noble Earl, Lord Russell, the noble Lord, Lord Vaux, and the Minister the value of lost discounts is about £1,200 a customer. That loss will disproportionately affect disadvantaged groups, such as the elderly and ethnic minorities—people who have been described as “skint little people”—who are significantly more likely to be on heat networks. Could the Minister set out what specific initiatives have been undertaken to encourage take-up of EBDS bids by heat networks? Have they made inroads into identifying where the qualifying heat suppliers are, so that they can be targeted and encouraged to apply? Which initiatives have been successful, if any, and how recently? Has it been an evolving, slow process?

The proposal in this instrument makes administrative sense, rather than leaving open an estimated total liability of £6 million for not closing the scheme to new applicants. Administrative sense is one side of this equation; the other side is the customers, and it seems less considered from their perspective. The Joint Committee on Statutory Instruments and His Majesty’s Opposition initially expressed concern that an obligation was being placed on intermediaries without any means of enforcing it. It is all very well requiring someone to do something when, if they fail to do it, nothing happens except that the individuals can take them to court or to the ombudsman.

How many times has that happened during the course of the scheme? I suspect it is very few times, if any. Can the Minister tell us whether any such initiatives have been taken? Essentially, this is about a vulnerable customer being required to take their landlord to court to get a subsidy for their gas bill. The chances of that happening are fairly remote, but we will no doubt hear from the Minister on that. This means that companies and organisations that have failed to apply for, or pass on, discounts have simply got away with it. Who knows the truth of that? We do not know who they are.

As I indicated, we support the closing of the scheme and the ending date for applications, but we are unhappy with the way the scheme has been allowed to drift into oblivion with no forfeit for those who should have acted on it.

[Lord Callanan (Con)]

I thank all three noble Lords for their contributions. I am proud to say that, through the scheme, the Government have provided support to hundreds of thousands of households, helping them with financial pressures when they needed it most. The Government remain fully aware of the continued challenges posed by cost of living pressures, including the impact of energy bills. We are providing extensive financial support to households, including a package of support to assist households with the rising cost of living—this will total over £104 billion, or £3,700 per household on average, between 2022 and 2025. All three noble Lords recognised the extensive package of support that was put in place.

I totally understand the points made by the noble Earl, Lord Russell, and the noble Lord, Lord Lennie, on the heat network sector. The noble Earl is right that our database is not as good as it could be in terms of what heat networks are available. It is perfectly possible at the moment for anybody to build a block of flats and, in effect, set up a heat network; they do not necessarily have to tell the Government about it. However, if noble Lords remember, we recognised that in the Energy Act, where we took powers to regulate the heat network sector. That is why we are introducing new consumer regulations for heat networks and, from next year, we will have new consumer protections in place, provided through the Energy Act. That will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be unfair, or if prices are significantly higher than comparable heating systems. They are, in effect, natural monopolies, and therefore it is right that consumer protections exist. Those regulations will also seek to introduce back-billing rules, which exist already to protect gas and electricity customers.

The noble Lord, Lord Vaux, raised an important point about reaching as many customers as possible. It is indeed a priority for my department to ensure that as many customers as possible access the support available to them. So far, 12,000 applications have been approved under the scheme, which means that hundreds of thousands of domestic customers have been supported. We think that that figure of 12,000 represents the vast majority of qualified heat suppliers. We know that a scheme that was very much developed in haste in response to the energy crisis—as noble Lords will remember—was never going to be perfect. On top of that, we will strive to make sure that as many people as possible are reached by the scheme— but we think that it has reached the vast majority of eligible customers. We are targeting communications at heat suppliers with vulnerable customers, including housing associations and local authorities, and we will continue to do so.

The noble Lord, Lord Vaux, raised an important question—not at all related to this statutory instrument—about the distortions of gas and electricity pricing, and the protections provided to customers as part of that. It is fair to say that this is a big issue that we are concerned about. Ultimately, the answer to the noble Lord’s question is that, as the amount of gas on the network declines and the amount of gas used to generate power declines, prices will stabilise and there will be a steady decoupling. There are no immediate solutions to that. Perhaps it would be more sensible for me to write to the noble Lord with more detail on the considerations that have gone into this, because a lot of work has gone on, including a lot of studying of the market to see how we can improve it. I recognise that many people consider that they are getting renewable electricity through their suppliers, but the price that they receive for it reflects the cost of gas in the system, because it is a centralised market. I recognise that people see that as anomalous, and we are looking closely at this.

As I said, we recognise that customers on heat networks are not currently protected by the same set of protections as other customers, so in future they will be protected by Ofgem via the regulations that I mentioned earlier. The noble Earl, Lord Russell, raised concerns about the impact on vulnerable customers on communal networks. Careful consideration has been given to equality when amending these regulations. We are fully aware that heat networks are more likely than other comparable heat sources to serve vulnerable and elderly customers, which is why we have carried out a number of activities to try to ensure that they receive the support to which they are entitled. We continue to engage with stakeholders such as the Heat Trust to learn about any issues with the customer journey, such as on the pass-through, and any other heat networks struggling with their applications so that we can continue to provide them with support.

--- Later in debate ---

[Lord Lennie (Lab)]

In the unlikely event that a customer takes a heat network to a court or ombudsman before the scheme closes, I presume that that application could continue beyond 31 March if it is not resolved by then and that the payment could duly be made.

[Lord Callanan (Con)]

That is indeed the case. The application would continue beyond 31 March. Even after the scheme has ended, the responsibility of the supplier during the application of the scheme continues to be legally valid and therefore it is possible to take retrospective action against a heat supplier that has not fulfilled its legal obligations.

Nuclear Decommissioning Authority (Pension Scheme Amendment) Regulations 2024

Lord Lennie Excerpts

Tuesday 13th February 2024 Grand Committee

[Earl Russell (LD)]

No? Okay, that is fine. Finally, how will the Minister monitor the implementation of the changes? Will that be reported anywhere?

[Lord Lennie (Lab)]

My Lords, this instrument enacts the Nuclear Decommissioning Authority pension scheme, based on the review of public sector pension schemes by my noble friend Lord Hutton in 2011. This resulted in the Public Sector Pensions Act, which enabled the majority of public sector pensions to move from final salary to career average revalued earnings schemes. About 8,000 workers are affected as a result of this instrument. We have nothing to complain about on the scheme, but the process has raised a few questions, as the noble Lord, Lord Young, and the noble Earl, Lord Russell, have pointed out. I would like these to be addressed.

During the consultation, many respondents raised concerns that the proposed definitions and the application of the proposed powers were insufficiently clear or too broad. Many sought assurances that the powers would be restricted to implementing the reform agreed with their national trade unions. Furthermore, respondents requested either member or trade union and/or trustee engagement prior to the use of any of the powers. Could the Minister respond to those concerns?

The trustees of the CNPP and MEG-ESPS asked that they be given sufficient time to review the final rule amendments, indicating that about 12 months would have been appropriate. The response to the consultation says that, in the light of this specific request, as much notice as possible would be given to the trustees and members prior to implementation. We now know that the implementation date will be 1 April 2024. Can the Minister tell us when the Government notified the trustees of the changes? Did they deem this sufficient for their purposes of consultation and informing their members?

The noble Lord, Lord Young, raised a concern regarding the reform of the pensions for NDA employees who are covered by the Electricity (Protected Persons) (Scotland) Pension Regulations, which were not included in the public consultation. There are very few of them, as the noble Lord and the information provided say. How many are there? If a change is to be brought in for the persons in Scotland, presumably another full consultation will take place to precede any further regulations.

Finally, to repeat the question of the noble Lord, Lord Young, and the noble Earl, Lord Russell, the decision to introduce the scheme was taken on 28 December. There has been plenty of parliamentary time for this half-hour debate to take place, so could we have the actual reason why it was delayed so long?

[Lord Callanan (Con)]

My Lords, I thank all noble Lords for their valuable contributions to this debate.

I will start with the points made by my noble friend Lord Young and the noble Earl, Lord Russell. On the small numbers of people excluded, if an individual is entitled to pension protection under the Electricity (Protected Persons) (Scotland) Pension Regulations, they are not in scope for the changes in the NDA group. Whether an individual has this protection will depend on whom they were employed by and the pension scheme that they were eligible to be a member of in March 1990. The Government have reserved their position to keep this under review.

I think that every noble Lord rightly raised the delay in bringing forward these provisions. It was not that we could not find 20 minutes of parliamentary time over six years—if that were true, my noble friend would have a very valid point—but that we did not get the primary powers we required, as he will recall, until the Energy Bill was enacted late last year. It was entirely a result of needing the primary powers before we could make these changes, not a lack of parliamentary time. A great many other measures were held up due to lack of parliamentary time, but that was not the reason for the delay here. My honourable friend the Minister for Nuclear in the other place met the trade unions last year to discuss the NDA provisions in the then Energy Bill. They noted that they were also concerned about the length of time but, when the delay was explained, they were broadly understanding of the reasons.

On the £200 million of savings, despite the delay in the introduction of this legislation, we estimate that the level of savings remains broadly accurate. The exact level will depend on the change to pension arrangements and will vary depending on when members of staff retire, but we still believe that the savings will be significant, of the order of £200 million.

The number of staff affected—broadly 8,000—remains the same. Employees affected were aware of the changes due to be enacted as of April 2024, and there has been a great deal of communication during the last year, including a website set up for those affected. If changes are required to schemes not covered by these regulations, such as schemes in Scotland, that would require further consultation. The Government remain committed to ensuring that public sector pension reform proceeds in line with the 2011 review of the noble Lord, Lord Hutton. These regulations are essential to the success of the implementation of CARE-based pension reform in the NDA group in accordance with broader public sector pay policy.

Reflecting back, it is evident that the complexities of the NDA group’s pension schemes required tailored reforms. Engagement with the trade unions resulted in a bespoke career average revalued earnings scheme, aligning with the broader public sector framework and maintaining valuable benefits for its members. Furthermore, the reform preserves commitments to those excellent benefits, notably including provisions for members to retire at their current retirement age, as I said in opening, which for the majority will be 60. These measures will align NDA group final salary pensions with wider public sector standards, ensuring fairness and efficiency, yielding substantial financial savings and bolstering the NDA’s mission of responsibly decommissioning the UK’s nuclear legacy. I think I have answered all the points put to me—

Civil Nuclear Road Map

Lord Lennie Excerpts

Monday 15th January 2024 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I thank the Minister for the Statement and wish him and his colleagues as happy a new year as possible, in the circumstances.

Nuclear energy is a key part of Britain’s future energy mix. We therefore support the Government’s commitment to new nuclear power. Nuclear power is a long-term project that requires cross-party consensus. I confirm that, as far as we are concerned, we have it. It is not new that we have a need for more homegrown, clean power in this country to cut energy bills and give us energy security, but the vulnerabilities of the current system have been deeply exposed by the energy bills crisis and the invasion of Ukraine, showing our reliance on external supply over the last two years.

Although this latest commitment is welcome, it is something of an irony that this road map emerged from Chris Skidmore’s independent review of net zero. Given the reason for his resignation being the lack of progress by the Government on energy and climate policy, particularly the Offshore Petroleum Licensing Bill, do the Government not find it counterproductive to be taking one step forward and one step back at the same time?

Given this history, one would understand the nuclear industry being at least sceptical of the commitments in the Government’s Statement. What concrete steps are the Government taking in the short term to give the industry the confidence to work alongside them to deliver what the road map offers?

Furthermore, it is disappointing that, over the past 13 years, progress has stalled under this Government. They came into power in 2010, with 10 new sites having been identified by the previous Labour Government, yet they still have not managed to complete one nuclear power station. Even this newly promised road map is coming two years later than promised. That is two extra years when people will not feel the benefits. However long it takes for bills to fall as a result of the Government’s long overdue realisation that we need to generate more clean electricity, it will be two years later than it could have been. None the less, do the Government have a timeline for when that will happen? What assessment have they made of the expected impact of bills in the longer terms?

While of course it is a road map for 2050, the report also sets out a number of steps to be taken in the next 12 months. One of these is publishing a nuclear skills task force report alongside a defence nuclear enterprise Command Paper. Regarding the former, can the Minister give us a preview by telling the House what steps are already being taken by the Government to ensure that the UK retains critical skills in our nuclear sector? These jobs are highly skilled, well-paid, unionised and an asset that should be protected and treasured right through the supply chain, from apprenticeships to nuclear physicists.

Another step in the next 12 months is to finally reach an investment decision on Sizewell C, before the end of this Parliament. That commitment is also welcome, but for Hinkley Point C there is less certainty. Will the Minister update us on the timeline for Hinkley Point C, which was originally promised to be delivered by 2017, seven years ago? When will it start supplying power to households?

Finally, also said to be happening in the next year is completing the Great British Nuclear-led SMR technology selection process, thus announcing which technologies will be supported to achieve final investment decisions by 2029. There is much frustration in the industry, where attempts to site SMRs face delays and blockages. What steps will the Government take to unblock this and widen the development of SMRs and other advanced technologies?

[Earl Russell (LD)]

My Lords, I thank the noble Lord, Lord Lennie, for his contribution. This road map is overdue but at least it is here. The question is: will timely financial investment and industry participation follow? The Liberal Democrats recognise that nuclear energy has always been part of our energy mix and will continue to be so as we transition away from fossil fuels.

The road map creates new risks and does little to provide energy security in the medium term. It sounds very glorious to meet one-quarter of our electricity demands by 2050, but will it deliver? It is a bit of a curate’s egg. On these Benches, we think that the Government are putting too many of our energy eggs in the “grand nuclear gigawatt energy infrastructure projects will always deliver” basket. Gigawatt nuclear energy projects have a long history of being announced with much fanfare, running into a blizzard of problems, becoming delayed, being delivered late and way over budget or not being delivered at all. The reality of nuclear projects in the UK is that Hinkley Point C is well over budget, now £33 billion, and late. Little progress has been made on Sizewell C, despite years of discussion and attempts to find ways to finance it.

The current proposed financing package charges already hard-pressed consumers up-front. Why will it be any different this time? This strategy requires the extension of four AGR nuclear power plants beyond their planned end of life and is subject to regulatory approval. When does the Minister expect the regulators to take these decisions? Mini reactors should be explored, but this should be as well as, not instead of, investing in renewable energy.

If planning and regulatory processes can be streamlined for nuclear, surely that can be done for offshore and onshore wind. We welcome the £300 million invested to free the UK from energy dependence on Russian advanced nuclear fuels. This is critical to our security. When does the Minister expect that the UK will be totally free from Russia? The Government must be able to give a true account of the costs of nuclear decommissioning.

The future is renewable. By 2030, technology improvements could slash today’s prices by one-quarter for a wind and half for solar. Other technologies, such as long-term storage, are also promising. The Liberal Democrats are committed to ensuring that 80% of the UK’s electricity is generated by renewables by 2030. The UK Government are aiming to decarbonise Great Britain’s electricity system fully by 2035, yet they have not provided a coherent strategy to achieve their goal. Investment in renewables and green technologies is essential. How do the Government plan to integrate the nuclear road map with their renewables ambitions? Given the scale of renewables that the Government are planning, inflexible nuclear base load systems are an ill fit. We need the flexibility provided by technologies such as interconnectors, storage and demand flexibility. Finally, when will we see a full and comprehensive integrated energy strategy to achieve net zero with a clear road map for renewables?

Hydrogen Heating

Lord Lennie Excerpts

Monday 11th December 2023 Lords Chamber

[Lord Callanan (Con)]

My noble friend makes a very good point. We will of course fully consider those recommendations alongside the views on hydrogen heating.

[Lord Lennie (Lab)]

My Lords, newspaper reports at the weekend suggested that the Government were looking for an entire town to use as a hydrogen heating pilot. Given the difficulties in Whitby and Redcar, referred to by the noble Baroness, Lady Sheehan, which are not yet resolved but will be very soon, and recent scientific developments, which she also referred to, about indirect warming from hydrogen emissions being higher than previously thought, does the Minister think that now is the right time to be pushing ahead with this?

[Lord Callanan (Con)]

The noble Lord will find out whether now is the right time to be pushing ahead with it when we announce the decision. He should not necessarily believe everything that he reads in the newspapers.

Climate Change: Aims for COP 28

Lord Lennie Excerpts

Tuesday 28th November 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Baroness makes an important point. As she mentioned, we are reviewing our membership. I do not know when a decision will be taken. I hesitate to use the word “imminently” after the last question, but I am sure that we will want to act as quickly as possible.

[Lord Lennie (Lab)]

My Lords, staggeringly, we lose more than 15 million trees globally each year due to deforestation. The Center for Global Development predicts that we will lose at least 1 million square miles of forested land by 2050. Can the Government give an update on their pledge to the COP 26 to reverse deforestation by 2030? Can the Minister tell the House whether the Government will use COP 28 as an opportunity to reconsider this key commitment?

[Lord Callanan (Con)]

The noble Lord makes an important point. We helped to secure an agreement on the Kunming-Montreal global biodiversity framework to halt and reverse biodiversity loss by 2030, and the agreement on marine biodiversity in areas beyond national jurisdiction. We were pleased to support that during our COP presidency and want to continue doing so.

Green Gas Support Scheme (Amendment) Regulations 2023

Lord Lennie Excerpts

Monday 20th November 2023 Grand Committee

[Lord Lennie (Lab)]

The noble Lord has high expectations. As with the scheme we just discussed, we were very supportive of this scheme when it came out and we still are. Supporting the injection of biomethane into the gas grid, replacing other gases, produces substantial carbon savings and is very welcome indeed. As such, I will not speak for long on this instrument, which simply makes changes to improve the administration of what is already a very positive scheme.

The extent of these changes is to improve the administration of the green gas levy, as the Minister said, to reduce the administrative burden for Ofgem and the gas suppliers that pay it, and to ensure a maintained link between the regulations and policy intent. We welcome the lower administrative burden for Ofgem. It is due, not least, to successful efforts during the passage of the Energy Bill, and it now has a specific mandate to support the Government to meet their net-zero obligation.

I have a few questions, which may help the noble Lord, Lord Teverson, in his curiosity about this. Where the instrument changed the green gas levy formerly, it implied that gas suppliers were paying too much due to how interest on funds is allocated. Specifically, interest that had accrued in Ofgem’s account was added to the levy collection target rather than deducted from it, which makes little sense. How did that apparent mistake happen? While it feels peculiar arguing against more money for a scheme that we support—for once, I am not suggesting that gas suppliers’ profits should be better used—it is important that such a scheme is administered fairly. What happened to the previous levies that were collected at too high a rate?

[Lord Callanan (Con)]

They were not taken.

[Lord Lennie (Lab)]

The instrument also allows the Secretary of State to review and update the maximum levy amount to ensure that the levy remains able to sufficiently finance the GGSS after 2008-09, as the Minister said. This of course makes sense, as it is a good scheme and should be financed, but I am cautious on both sides of the argument. If the Secretary of State is to have this new power, why was the scheme not initially created with it written in? Also, if the predicted funding requirement increase is in part predicated on a welcome increase in biomethane production, do the Government foresee a situation where the other reason for the increase—inflation, which I should note was previously caused by the Government—could make a decision to increase the MLA difficult? If so, what happens to the scheme and, if not, could the MLA not increase automatically?

I am curious about the de minimis payments the Minister mentioned. Is this expected to make a net loss or profit for the levy, and has any review been done of the administrative functions that make small payments disproportionately burdensome?

As the Minister said, the other changes are minor, so I will conclude, other than to restate that it is welcome that this positive scheme is being further improved.

[Lord Callanan (Con)]

I thank the noble Lord, Lord Teverson, for his very brief contribution and his support. I will come on to the questions from the noble Lord, Lord Lennie, in a moment.

As I said, the green gas levy is charged to licensed gas suppliers in Great Britain to fund the green gas support scheme. These policies make an important contribution to achieving our emissions reduction target by incentivising the production of biomethane and its injection into the gas grid. This reduces the emissions intensity of the UK’s gas supply and ensures the capture and use of emissions from waste, which is used as feedstock for green gas production.

The SI will ensure that the green gas levy can run optimally and will reduce administrative burdens for Ofgem and gas suppliers, thus reducing costs. It will also ensure that the levy is set as intended by altering the collection formula and by adding flexibility to the setting of the maximum levy amount. Overall, this will help the delivery of a cost-effective levy, benefiting policy administration and gas suppliers and, therefore, bill payers.

I will pick up the first question from the noble Lord, Lord Lennie. As I said in my introduction, the interest is charged two years in arrears. There has therefore been no net effect from what was an administrative error when the regulations were tabled. We want this modification to the SI approved now so that, when those interest payments subsequently become due, they will be used to subtract and not add to the overall amount—as was originally stated in error.

The further changes will improve the administration of the levy by Ofgem and for all gas suppliers, and the instrument gives us the opportunity to make these changes. The levy was launched on 30 November 2021, and the intervening years to this point have given us the opportunity to identify one or two minor technical changes to the levy to help reduce the administrative burden. In answer to the noble Lord’s second question, again, we do not expect the de minimis level to make any difference to the overall rate—it is purely that for those very few gas suppliers that have a tiny number of meter points, the administration cost of the levy exceeds the sum raised, so actually it will probably save money in the longer term. However, of course it has no effect on all the big suppliers.

I have dealt with both questions from the noble Lord, Lord Lennie, and I commend this regulation to the House.

Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023

Lord Lennie Excerpts

Monday 20th November 2023 Grand Committee

[Lord Teverson (LD)]

My Lords, perhaps I may make a few comments in front of the crowd here. I welcome the SI generally , obviously, and want to try to ensure that it works properly. I have a couple of specific questions.

I am interested in understanding how the free allocations were allocated or what the baseline was for the airlines. Also, in the scheme as a whole, what proportion of units are free issue these days? I would be very interested to hear that for the current period, which I think goes up to 2026.

The Minister referred to the UK ETS as the cornerstone of ambition in terms of net zero, but of course, that cornerstone is crumbling at the moment. I would be very interested to hear, more strategically, how the Minister sees the fall in the carbon price per tonne, which has moved this year from around £100 at one point down to under £50.

To me, that seems to be, in the words of Energy UK, a major disincentive to investment in the renewables sector. As I understand it, it has threatened the Treasury to the tune of £1 billion so far this year and will mean a hit of something like £3 billion on the Treasury per annum if that price continues. As we know, there is also a threat from the European Union’s move to a carbon border adjustment mechanism—particularly in 2026, when those measures will really start to bite. There is a feeling that UK industry’s exports to the European Union could be threatened by some £500 million per year if that price remains as it is. I want to know the Minister’s understanding of why the price has fallen so much. My economics A-level tells me that, with supply and demand, when demand stays roughly the same but the price goes down, there is an all-round surplus in the supply of those units. However, there is also a volatility there, perhaps through a lack of liquidity in the scheme as a whole.

Looking again at the trade and co-operation agreement, particularly the area of energy in 2025, I would be interested to understand whether this is an opportunity to bring those trading schemes more together again, which was a target that the Government sought to achieve when that agreement was first made. Clearly, the fall in price strongly affects the renewables and clean energy industries. It seems to me that, not just from a Treasury point of view but from an industry and net zero point of view, we need to get that price back up again. I would be interested to hear the Minister’s comments on how that can be achieved—or indeed whether the Government wish to achieve it.

[Lord Lennie (Lab)]

My Lords, when the UK ETS was established due to the UK’s participation in the EU ETS ending, the Opposition supported it. It is essential that the UK has a robust carbon price to help reduce emissions. So when the UK ETS was launched, we expressed a preference for a link with the EU ETS. Indeed, the EU-UK Trade and Cooperation Agreement states that both parties

“shall give serious consideration to linking”,

which would lower the cost of decarbonisation through more price efficiency discovery and easier trade. Most importantly, it would ensure that UK exports of high-carbon products to the EU are exempt from the EU’s carbon border adjustment mechanism. This remains our preference, to support UK businesses in remaining competitive and retaining trade access to critical markets. Can the Minister tell the Committee whether an update on any such consideration is still being considered? Can he also say whether the Government have made any projections on the impact that the CBAM will have on our exports? What is welcome is the seriousness with which the Government are treating this while we remain unliked.

I turn to the instrument itself, which amends the ETS in five areas; I will touch on each of them but do not oppose any of them. As these changes do not seem simply to be updates on the system, I am keen to hear from the Minister how foreseeable the situations that led to them were and what impact the delay in implementing them, from when the UK ETS was established, has had.

First, as we heard from the Minister, the instrument implements a cap on the maximum amount of free allocation that aircraft operators are eligible to receive at 100% of their verified emissions. Not only does this seem to be common sense but, for the next two years, by 2021’s figures, it will save around a fifth by putting an end to overallocations in the sector. That is welcome. Again, by 2021’s numbers, this will prevent around £100 million of potential profits from operators selling these overallocations. Do the Government have any projection for 2024-25 or are the figures on pounds and percentage of emissions expected to be roughly the same? Going back to the first question, could this not have been seen from the start, or was it by design?

Energy Bill [HL]

Lord Lennie Excerpts

Consideration of Commons amendments
Tuesday 24th October 2023 Lords Chamber

[Lord Teverson (LD)]

My Lords, I too congratulate the noble Baroness, Lady Boycott, on her persistence in this area. One of the strong messages that came out between Committee and Report in this House was the slow progress, and lack of progress, on community schemes. I very much hope that this consultation will reverse that trend. It seems slightly ironic, though typical, that the objection from the Commons is on there being a timetable, whereas we all know that for anything to happen, you need a timetable to focus.

On these Benches we are now keen to get this Bill on the statute book and that it becomes an Act. It has been delayed a number of times, mainly from the government side, as it has progressed through both Houses. There are a lot of important parts of this Bill that need to happen. I very much hope that the future systems operator will be quickly nominated and can move into action, so that a number of the strategic bottlenecks that we have in our energy sector can be swept away and solved. Again, I thank the noble Baroness for her persistence in this area, and I hope that consultation will move to action very quickly.

[Lord Lennie (Lab)]

My Lords, I thank the noble Baroness, Lady Boycott, for her persistence on this. I agree with what she is trying to achieve. The Minister came dangerously close to Rumsfeld-speak when he effectively said that we cannot know the unknowables. All that we and the amendment were suggesting was that a report needs to come forward and then we can determine how we need to act, which seems entirely sensible.

I agree with the noble Lord, Lord Teverson: it is time that the Bill got on to the statute book. The Bill has been far too long in digestion. Let us hope we can now eat it all and enjoy its flavour.

Climate Financing

Lord Lennie Excerpts

Tuesday 17th October 2023 Lords Chamber

[Lord Callanan (Con)]

As far as I know, we are fully committed to meeting those targets. We are very proud of our record and all the progress that we have made, including at least £3 billion on mitigating, protecting and restoring nature. We are on track to meet all our commitments.

[Lord Lennie (Lab)]

According to the International Institute for Sustainable Development, over $1 trillion of public money has been poured into fossil-fuel subsidies since COP 26, mainly in response to the war in Ukraine. This eclipses tenfold the climate finance initiatives made at COP 26. Do the Government accept that this lack of long-term thinking about energy efficiency, onshore wind and solar has left us vulnerable to these outside forces?

[Lord Callanan (Con)]

I do not agree with the noble Lord. We have an extremely good record on energy efficiency. To take one of his examples, we have improved the number of properties that are EPC band C or above from 14% when we came into office up to nearly 50% now. Obviously, we need to make a lot more progress. We are spending £6.5 billion in this Parliament on energy efficiency and have already committed another £6 billion from 2025. We are doing extremely well in this area.

Net Zero (Economic Affairs Committee Report)

Lord Lennie Excerpts

Monday 16th October 2023 Lords Chamber

[Lord Lennie (Lab)]

My Lords, I thank the noble Baroness, Lady Kramer, and, through her, the noble Lord, Lord Bridges, and other members of the Economic Affairs Committee for producing this weighty report. July 2022 was also when the Government first announced their intention to legislate for the country’s future energy needs in the Energy Bill. The Energy Bill has now expanded to some 400-plus pages, has still not become an Act of Parliament and is due for further consideration by the other place later this week.

[Lord Callanan (Con)]

It would not if the Government acted as Parliament recommended.

[Lord Lennie (Lab)]

There is a process to go through. The amendments we made were to the benefit of the Bill rather than to take away from it.

There is some crossover between the Economic Affairs Committee report and the legislation but, sadly, nowhere near enough. The starting point of this report was back in February 2022, when the Economic Affairs Committee launched an inquiry into how the Government could support investment in UK energy to achieve greater security of supply, improve affordability and meet the UK’s net-zero targets.

The committee considered how the Government planned to achieve the following two separate but related objectives. First was the commitment in law to achieve net zero by 2050 alongside the target to decarbonise the system by 2035. The committee considered how this target might be achieved while ensuring the UK’s energy supply was “affordable and reliable”. It argued that encouraging private sector investment was the key to achieving net zero. However, the committee said there was

“a gap between the Government’s ambitions and the practical policy that is needed to provide confidence and clear market signals to investors”.

The second was the Government’s plans to mitigate the effect of rising energy prices exacerbated by Russia’s appalling invasion of Ukraine in 2022.

The report produced by the committee recommended that the Government should take the following measures over the next three to five years—now two to four years. First, they should publish a net-zero delivery plan which would detail how the UK could achieve net zero in an orderly way. Secondly, they should publish an energy demand reduction strategy which would include measures to increase incentives for investment in energy efficiency measures for buildings and to support the development of resilient supply chains and workforce skills—as the noble Lord, Lord Teverson, pointed out, this has not happened. Thirdly, they should increase the deployment of renewable energy sources to reduce the UK’s dependence on gas markets, including onshore wind, which it describes as

“one of the cheapest and fastest ways to increase renewable energy generation”,

despite the reservations of the noble Lord, Lord Frost. Fourthly, they should maintain existing energy generation in the immediate future while extending the life of nuclear power stations over coal power stations, as this would result in lower carbon emissions. Finally, they should seek to reach agreement with other European countries to manage energy supply emergencies. Have any of these measures been taken on board?

The committee also recommended that the Government should take action to increase investor confidence to make more private capital available to support the transition to net zero, by setting out a cost analysis of their targets to achieve 24 gigawatts of nuclear capacity. As the noble Baroness, Lady Kramer, pointed out, this figure is more than double the capacity assumed by the Climate Change Committee. Can the Minister explain the variance between the two? It also recommended they provide more detail on the capacity, timeframes and expected costs of increasing long-duration energy storage, outline the market structures and mechanisms that would be used to support increased hydrogen production and support carbon capture and storage by fulfilling their commitment to develop four low-carbon industrial clusters. They should also design “market models” to provide information to investors on the types of technology required, to give potential investors greater confidence in the long-term viability of carbon capture and storage. Is there any sign of this happening?

Since the report was published, a number of government changes have affected energy policy. The Energy Bill was introduced in 2022 under Prime Minister Boris Johnson. It included measures intended to leverage investment in clean technologies, protect customers and maintain the safety, security and resilience of the energy system. It reached Committee on 7 September 2022 and was thereafter paused by the new Prime Minister, Liz Truss. Following Liz Truss’s resignation, in December 2022 Committee started again and, under Prime Minister Rishi Sunak, the House of Commons is now scheduled to consider Lords amendments on 18 October. In February 2023, BEIS was replaced, with responsibility for energy policy transferred to the Department for Energy Security and Net Zero. Grant Shapps served as Secretary of State for Energy from February to 31 August; currently, the Secretary of State is Claire Coutinho, but for how long is anyone’s guess.

Chris Skidmore published his review Mission Zero: Independent Review of Net Zero on 13 January 2023. It concluded that the UK was not on track to meet all its targets towards achieving net zero and stated that the Government needed to do more to make the most of the economic opportunities arising from the transition to net zero. The Government have published a series of policy updates on their plans. In March 2023, Powering Up Britain was Secretary of State Grant Shapps’s launch of the new Government’s energy strategy. In the same month, Mobilising Green Investment: 2023 Green Finance Strategy updated the previous green strategy. In this, the Government committed to commissioning an

“industry-led … review into how the UK can enhance our position and become the best place in the world for raising transition capital”.

Has it happened?

On 20 September 2023, Rishi Sunak, still the PM, gave a speech in which he announced some changes to government policy on achieving net zero. While working towards meeting their overall 2050 net-zero target, he said that policies including the ending of the sale of petrol and diesel cars and vans, plus the sale of new gas boilers, would be pushed back by five years to 2035. How does this help achieve net zero? Its effect has been to deter investment by undermining the commitment and consistency required by business, as the noble Lord, Lord Teverson, and the noble Baroness, Lady Kramer, said.

This is the framework in which the Economic Affairs Committee report is being considered. Of its 38 recommendations, only a small handful have been taken forward. However, the Government’s initiatives to secure private capital by certainty and leadership are woefully inadequate. In the meantime, more changes have been confirmed. Alok Sharma, chair of COP 26, is standing down. Chris Skidmore is not going to contest his seat in the next general election. The offshore wind auction attracted no bids because the strike price was wrong.

Tony Blair once said:

“I’ve not got a reverse gear”.


It is a pity the same cannot be said of Rishi Sunak. The report rightly states that the Government cannot be expected to accurately predict what is going to happen in the future. Surely, though, we can expect more than what is currently on offer.

Labour would establish Great British Energy. It would invest in order that Britain can lead the world in carbon-free energy and technologies. Labour will ensure that we have the grid we need to rewire our country. Our public investment will stimulate private investment to bring prosperity to every part of Britain.

[Lord Callanan (Con)]

First, I add my thanks to the noble Baroness, Lady Kramer, for securing this debate, as well as thanking noble Lords for their insightful contributions.

It was a bit rich for the noble Lord, Lord Lennie, to criticise us for not getting the Energy Bill on to the statute book. The reason we have not done that is because the Opposition—despite saying that they support it—have supported largely irrelevant and superfluous amendments to the Bill. If the noble Lord is so keen to get it on to the statute book, he has the opportunity to prove it next week when it will come back to this House. I hope the Opposition will agree with the passage of the Bill, rather than just saying that they support it. We will then be able to get it on to the statute book and proceed to the secondary legislation, which will result from the primary powers, on things such as hydrogen, CCUS, et cetera.

[Lord Lennie (Lab)]

I think it is a bit rich for the Minister to say that the Opposition parties are responsible for the delay to the Energy Bill. It was paused by the Government for three or four months, when they went absolutely silent. We were knocking on the door asking what was happening with the Energy Bill, but nothing was forthcoming.