draft Electricity Supplier Obligations (amendment and excluded electricity) (amendment) regulations 2017

Alan Brown Excerpts

Monday 16th October 2017 General Committees

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Gapes. In general, we, too, welcome the regulations. Anything that can help energy-intensive industry to be competitive, to keep jobs and to operate is clearly welcome.

The Minister touched on the additional £1 per domestic customer. As has been highlighted, it is quoted elsewhere as £1.80. Will the Minister clarify what the actual cost will be for domestic users? I noted in her opening remarks that she did not highlight the fact that medium users are estimated to carry a burden of £3,100 to support the offsets to energy-intensive industry. What proposals do the Government have to help businesses that will be hit with that extra cost?

The Scottish Government are using Resource Efficient Scotland, which works with businesses to bring down their energy bills and make them more energy efficient, and also looks at water use. What help will the UK Government provide? The proposed retail energy price cap was mentioned. To keep bills down in general for businesses and domestic users, it is important that the Government have a coherent strategy for future contract for difference auctions. Onshore wind currently is the cheapest form of renewable generation, so it must be allowed to bid in future auctions. Will the Minister say anything about that? The clean growth strategy published last week announced more dash for nuclear. We know how expensive Hinkley is, so what is the likely impact of more nuclear projects on businesses and domestic users?

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[Margot James]

The estimate was too high in the first place and it has reduced. I will look into the reasons for that and I will write to the hon. Gentleman. In his speech, he asked about the policy for this sector of the economy post-Brexit—might we pursue a more competitive approach vis-à-vis the rest of the European Union? I think that he is asking what our policy on state aid will be after we leave the European Union, and that is a matter for the negotiations.

I think I have addressed the questions raised by Committee members. The hon. Member for Bethnal Green and Bow said that the average increased cost of electricity for a medium business user would be £3,100 a year—she is correct on that point.

[Alan Brown]

What will the Government do to try to mitigate that £3,100 burden on businesses?

[Margot James]

For this measure to be cost neutral, the cost of exempting some energy intensive users has to be distributed fairly among businesses. For an average user—a medium-sized user—the uplift will be about £3,100. As yet, the Government do not have plans to mitigate that.

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[Margot James]

I am happy to write to the hon. Lady with more details of the assessment that has been carried out and about the size of the charities that have been scrutinised.

The exemption is a key component of our programme to reduce electricity costs for energy intensive industries. It will help to prevent putting those industries at a significant competitive disadvantage. The increase in industrial electricity costs due to funding the CfD can reduce the UK’s attractiveness as an investment location, and increases the risk that companies will invest and move elsewhere.

[Alan Brown]

Going back to funding the contracts for difference and managing the costs overall, the Minister will be aware that the last option—offshore wind—came in at £57.50 per megawatt-hour, compared with Hinkley at £92.50 per megawatt-hour. Onshore wind is going to be even cheaper than that. Will the Government take account of that the next time they auction bids for CfDs?

[Margot James]

I will ask my colleagues to write to the hon. Gentleman with more information. I would not like to mislead the House, and I do not have the information at my fingertips.