Draft Energy Bills Discount Scheme (Amendment) Regulations 2024

Amanda Solloway Excerpts

Tuesday 5th March 2024 General Committees

[The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)]

I beg to move,

That the Committee has considered the draft Energy Bills Discount Scheme (Amendment) Regulations 2024.

The Government responded decisively to the unprecedented rise in energy prices by delivering critical support to households and non-domestic energy consumers facing significant increases in their bills. More than £35 billion has been spent on supporting households via the energy price guarantee and the energy bill support scheme, and £8 billion is expected to be spent on non-domestic customers via the energy bill relief scheme and the energy bills discount scheme.

The energy bills discount scheme provides a discount on energy bills between 1 April 2023 and 31 March 2024 for those on non-domestic tariffs. It includes a higher level of support for heat suppliers with domestic customers, which reflects the fact that heat networks typically purchase their energy through commercial contracts and then sell it on to their domestic customers. That meant that heat network customers were not supported by the energy price guarantee as other domestic customers were.

The Energy Bills Discount Scheme Regulations 2023 require all heat suppliers that have eligible heat networks with domestic customers to apply for the higher EBDS heat network rate and then pass on to their customers the benefit that they receive. 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 supported heat network customer.

Our intention in amending the EBDS regulations is to provide a finite window within which heat network operators can apply for EBDS support. The EBDS regulations allow rules to be made about the scheme, including rules about the time within which a heat supplier must comply with the duty to apply for the scheme. However, the duty to apply does not come to an end if heat suppliers fail to apply within the deadline imposed through the rules. The regulations and rules do not currently impose any end date to the requirement to make an application. The result is that a qualifying heat supplier that has failed to comply with the rules must still apply for support even after the end of the scheme, which means that the Government would retain a legal obligation to process applications indefinitely and would therefore need to maintain and pay for the administration of applications indefinitely.

The Department’s policy is to provide for an end date after which further applications cannot be made. The final date on which an application can be made is to be specified in rules, which will be made and published if the draft regulations are approved. The intention is for the deadline to be 31 March 2024, to align with the end of the period covered by the EBDS. The 31 March end date has been widely publicised to the sector.

There will be a limited exception to the 31 March deadline: a two-week limited extension for cases in which the duty to apply arises so close to the deadline that it would be unreasonable to expect a heat supplier to be capable of applying. Those heat suppliers would have until 14 April to apply.

The most important aspect is the impact of the scheme on the individuals and families who are facing pressures on their bills right now. It is right that we introduce the deadline to ensure that consumers receive the benefits of the scheme in a timely manner. It is also essential that support reaches as many people as possible, so my Department has conducted extensive engagement to encourage all eligible networks to apply.

It is important to note that the creation of the deadline via the rules will not close down routes for consumers to seek redress. Dispute resolution through the energy ombudsman remains open to customers beyond the deadline imposed by the amending regulations. Further-more, customers can pursue their claim in the civil courts if necessary.

In conclusion, the draft statutory instrument will amend the EBDS regulations so that the duty to apply for the support is a duty to apply before a deadline. It is an essential step towards ensuring that we support customers while taking measures to draw in public spending as pressures from energy prices ease. I commend it to the Committee.

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[Amanda Solloway]

I thank the hon. Members for Southampton, Test and for Glasgow South West for their valuable contributions. As has been stated, this was an incredibly complex matter to work through. I give an assurance that customers have been at the heart of all that we endeavour to do.

The non-domestic point is not particularly related to this instrument, which is quite narrow. I can give an assurance that we are working with UKHospitality and other organisations to think about how we talk to suppliers about blend-and-extend contracts and about third-party intermediaries, but that is probably a matter for a different debate.

Through the EBDS, the Government have provided essential energy bill support to heat network customers to help to avoid unnecessary financial pressures during the energy crisis. To date, we have paid out £50 million in support and have approved nearly 12,000 applications to ensure that those who are exposed to volatile energy prices are supported.

The hon. Member for Southampton, Test asked whether we are considering support for customers on heat networks. He also raised an important point about customers getting a pass-through discount. Customers on heat networks are not protected by the same regulations as other domestic customers, so the Government are introducing a new regulation for heat networks. Alongside protections around service quality, it will give Ofgem powers to investigate and intervene on networks where prices for consumers appear to be unfair.

A scheme developed in haste, in response to the energy crisis, was never going to be perfect, but we have tried to ensure that as many people as possible have been reached. I am glad that through the scheme we have helped hundreds of thousands of people when they needed it most. We continue to target communications towards heat suppliers with vulnerable customers, including housing associations and local authorities. I have been keen to ensure that we use all available methods to reach out to as many consumers and customers as possible.

The Government are also helping with £6 billion of investment in energy efficiency improvements. It is expected that regulations will introduce back-billing rules for heat network providers, like those that already exist to protect gas and electricity customers. Our ambition is that consumer protections will be regulated from next year, with price regulation beginning in 2026.

The amendment that the draft regulations make to the EBDS regulations is necessary to ensure that the Government are not legally obliged to accept applications to the scheme indefinitely. It also balances our responsibility to limit the fiscal burden on the taxpayer.

From next year, we will have new consumer protections in place, provided through the Energy Act 2023. Regulations created via the Energy Act will give Ofgem powers to investigate and intervene on networks if prices for consumers appear to be unfair, or if prices are significantly higher than for comparable heating systems.

Once again, I commend the draft regulations to the Committee.

Question put and agreed to.