Energy Bills Discount Scheme (Amendment) Regulations 2024

Earl Russell 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.