Energy Prices Bill

Lord Lennie Excerpts

Committee stage
Monday 24th October 2022 Lords Chamber

Moved by

[Lord Lennie]

1: Clause 2, page 3, line 7, leave out “negative” and insert “affirmative”
Member’s explanatory statement
This amendment and others in the name of Lord Lennie make the regulations in the relevant sections subject to the affirmative procedure.

[Lord Lennie (Lab)]

My Lords, this group of amendments is all about making various clauses subject to the affirmative procedure in your Lordships’ House. I give notice that we intend to divide the House on Amendment 25.

The amendments affect Clauses 2, 3, 6, 7 and 16, and Schedules 1 and 2, making them subject to the affirmative procedure. The Government seek to justify some of the use of the negative procedure by pointing out that the Secretary of State already has the power to modify or revoke the schemes in Clauses 2 and 3, and Clauses 6 and 7 for Northern Ireland.

Clause 16, which confers powers to make it a temporary requirement on electricity generators to make payment regulations, uses the affirmative procedure on first use and the negative procedure thereafter. The Government’s justification for a temporary requirement represents a significant intervention in the electricity market. This clause will define the main parameters of the scheme. After this, the Government believe that interest will wane, with only minor or technical amendments likely to occur, therefore justifying the negative procedure thereafter.

The justification for the Schedule 1 powers is that, although the Government recognise that the powers are significant, they are necessary to allow the schemes for relief of GB businesses. The Delegated Powers and Regulatory Reform Committee report, established in haste last week, says that by including paragraph 3(2) of Schedule 1 the Government have completely ignored the recommendation contained in its report:

“No attempt has been made to limit the powers or to ensure that they will be subject to parliamentary scrutiny.”


Nor was any “compelling justification” offered to support the Government taking these powers. Schedule 2 powers relate to Northern Ireland, where a similar provision is proposed.

In Clauses 21 and 22, the subject of Amendment 25, the Government assert that their approach would include a fuller period of consultation with relevant stakeholders providing suppliers with earlier certainty. However, what guarantee is there that these steps will ever be taken? The department also considers that any delay could have negative consequences for those who were to benefit from the scheme. However, there are enough examples of regulations being scrutinised after the fact—for instance, those relating to Covid—and even after this primary legislation, which, as it stands, took effect from 1 October 2022. I cannot see why this cannot be applied here.

The pace of things is another justification offered by the Government. The affirmative procedure would not allow certainty that the licence modifications would follow and this in turn would inhibit suppliers making required operational changes, slowing delivery this winter.

There does not seem much justification for the Secretary of State taking these overwhelming powers. Clause 22 applies similar powers to Northern Ireland, also without the same compelling justification. It allows the Secretary of State to tackle barriers to delivering implementation of the schemes as necessary. There appears no justification for this at all. The Delegated Powers and Regulatory Reform Committee is firmly of the view that any power conferred by Clause 22 is inappropriate and that the Government should act by,

“imposing a time limit on the exercise of the power which is commensurate with other time limits contained within the Bill.”

I beg to move.

[Lord Rooker (Lab)]

My Lords, I shall speak briefly to some of the amendments in my name in this group. This is the only time I shall intervene. Although I have tabled amendments in the second and fourth groups, I do not propose to speak to them. What I am about to say covers the same points.

I declare an interest as a member of the Delegated Powers and Regulatory Reform Committee. I do not speak for the committee; the report does that. Over the weekend, I read the Government’s inadequate response to the report. I am grateful for the speed with which the Government responded, as I suspect other committee members are. That was useful but their response was completely inadequate. It is significant that the government response makes no mention at all of the Delegated Powers Committee’s report from November 2021, Democracy Denied? The Urgent Need to Rebalance Power between Parliament and the Executive.

Clause 22(5), which is not referred to in the government response, is the subject of Amendment 28. According to paragraph 14 of the Delegated Powers Committee’s report, Clause 22(5) is, in effect,

“a Henry VIII power because it allows the effect of legislation, including primary legislation, to be modified by a direction.”

Paragraph 14 also says:

“There are no limits on the kinds of requirements which may be imposed through the directions power.”


Paragraphs 14 to 18 say firmly that the powers in Clause 22 are inappropriate. Clause 22 brings in what is referred to as “disguised law”. This was referred to in the November 2021 report as “camouflaged legislation” and an “unacceptable ploy”.

The Delegated Powers Committee report on this Bill refers to the memorandum supplied with the Bill, particularly paragraphs 154 to 162. Referring to the government memo, the report says that it

“does not explain the full range of the things which can be done”.

It goes on to say, in paragraph 16:

“We are also not convinced by the reasons given in the Memorandum for the power not being subject to parliamentary scrutiny.”


As such, the Delegated Powers Committee report says that the Government appear

“to have completed ignored the recommendations”

in the committee’s report of November 2021.

I want to make a more general point, which I shall not repeat on the other group of amendments. I was not a member of the Delegated Powers Committee when its November 2021 report, Democracy Denied?, was published, in tandem and in co-operation with a report from the Secondary Legislation Scrutiny Committee of your Lordships’ House, entitled Government by Diktat: A Call to Return Power to Parliament. Both reports—that from the Delegated Powers Committee and that from the Secondary Legislation Scrutiny Committee—were about Parliament and the Executive. They were not about this House and the elected House of Commons. Parliament and the Executive are what this is about.

Both reports were debated in this House on 6 January under a Motion tabled by the noble Baroness, Lady Cavendish of Little Venice. I have no criticism of the Minister or his team for reasons I shall make clear. I do not expect he has read either report; I am not sure any Minister has. I do not hold the Minister responsible. He and his government colleagues are taking advantage of the slack role Parliament has played to bequeath powers from Parliament to the Executive.

On Wednesday 20 July this year—a significant date because it was the day before the Summer Recess started—both the Secondary Legislation Scrutiny Committee and the Delegated Powers and Regulatory Reform Committee, including Peers who had been members of those committees last year when the reports were prepared, took evidence on the reports from the then Leaders of both Houses and First Parliamentary Counsel. There was no sign that anybody had read anything about the 6 January debate on both of them. It was abundantly clear that neither of the then Leaders had even been briefed on the views of this House.

Parliamentary counsel have clearly continued to draft Bills, such as this Bill, which have “completely ignored” the recommendations of the Delegated Powers and Regulatory Reform Committee report, Democracy Denied? Why have they done this? Repeatedly, parliamentary counsel are producing Bills which transfer powers from Parliament to the Executive. It is parliamentary counsel doing this—they draft the Bills.

During the exchanges on 20 July in respect of what is referred to as Question 16, I asked the First Parliamentary Counsel, Dame Elizabeth Gardiner, about her saying during our evidence that day that counsel

“have that discussion on a daily basis with the teams and with the Ministers about the nature of what they are asking for”.

I pointed out that, in my time as a Minister, in both Houses, over 12 years—it is in the minutes—

“I understood … that parliamentary counsel took instructions from the department’s lawyers and Ministers never got involved with parliamentary counsel.”


Dame Elizabeth’s answer was:

“I think things have changed a lot ... Probably we do meet policy officials and Ministers more frequently on Bills than we would have done 30 years ago”.


I have checked on this. I think this change, or breach of convention, has happened in the past 12 years. My experience, particularly in two departments, as I recall, when I served in this House—there were four altogether, but two in particular—was that it was specifically said to me when I joined, because Bills came up, that in general the Government accepted most of the recommendations from the Delegated Powers and Regulatory Reform Committee. It was the norm to accept the majority. I was repeatedly told that. I think this change, or breach of convention—it is certainly a lapse in the accepted standards of conduct—has happened only since 2010, when somebody started playing wild with parliamentary procedures, and the House of Commons was blindsided by it. That, I think, is very dangerous.

I am prepared to say that I think the old way was best. If lawyers gave instructions for policy officials so that the policy officials would have to say to department’s lawyers, “This is what we want to do, and what our Ministers want to do”, the lawyers would then use the legal structures to put that case to parliamentary counsel. By and large, the system worked. I think it would be far less likely that clear recommendations made by Parliament would be “completely ignored” if the lawyers were the ones who gave the instructions to parliamentary counsel, as was the case up until 2010.

I trust the lawyers here to follow the conventions. Quite clearly, parliamentary counsel work with the Government—let us make no bones about it. These days, they do not even have their own office block in Whitehall, to which I was once invited to when I was a Minister in the other place. I know the way they work; they are now ensconced inside the Treasury. They work for the Government; they are not independent.

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[Lord Lennie (Lab)]

My Lords, that is an interesting explanation from the lawyers about whether it is a Henry VIII clause. If it looks like a Henry VIII clause and it smells like a Henry VIII clause, it is a Henry VIII clause.

My noble friends Lord Rooker and Lord Cunningham made the important point that the DPRR Committee in its report has condemned the powers contained in Clause 22. There is no getting away from it: if it is pace that the Government are seeking, subjecting those instruments to the affirmative procedure would not significantly inhibit the pace at which they operate. The powers are vast and huge, and the example that the Minister has given is an acceptable one, but it is not the only circumstance that one can envisage. One can envisage the powers being used not by the noble Lord but by a succeeding Minister, in a way that is unforeseen by him. Therefore, the concerns remain. However, having said that, I beg leave to withdraw Amendment 1.

Amendment 1 withdrawn.

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[Lord Teverson (LD)]

My Lords, I shall speak also to Amendment 6 in this group. Amendment 5 relates to the extension of the energy bill relief scheme for non-domestic customers. I hope that it is something that the Minister will be able to agree or reaffirm from the Dispatch Box, because it is really very straightforward. When the scheme was announced by the Government, only businesses that signed a fixed agreement after 1 April 2022 and those on variable rates were set to benefit. Businesses with energy agreements signed before this date—I repeat, that was 1 April—were unable to get a subsidy to their unit prices.

In the debate on the economy and the growth plan of 2022 in the House on Monday 10 October—so not so long ago—my noble friend Lord Fox raised this with the Minister, who responded that the Government would be “revising the cut-off date” so that contracts taken out between 1 December 2021 and 31 March 2022 would be “eligible for relief”. Can the Minister confirm that this is still the Government’s intention? If it is, given the uncertainty that businesses are facing with the current state of government, will he accept my Amendment 5, which seeks to put that commitment in the Bill? I see no reason why that should not be the case, to give absolute clarity and greater certainty to the non-domestic sector.

On Amendment 6, the alternative fuel payment scheme is intended to deliver a one-off payment of £100 to UK households which are not on the mains gas grid—I declare my own interest in that I rely on biomass and oil—and therefore use alternative fuels such as heating oil to heat their homes.

Powers in the Bill will enable the Government to deliver support via electricity bills under a similar delivery model to the energy bills support scheme, which, as noble Members will know, is a £400 non-repayable discount for eligible households to help with their energy bills, as announced in April by then Chancellor and soon-to-be Prime Minister Rishi Sunak. Households who are eligible for but do not receive alternative fuel payments or the £100 heat network payment—a very round number, as we saw on Second Reading—because they do not have a relationship with an electricity supplier, for example, will receive the £100 via this alternative fund, which will be provided by a designated body. According to the Government, they will set out timing and details of this payment soon. I look forward to hearing from the Minister whether we have any more detail at this time.

It is estimated that more than 4 million people in the UK are off the mains gas grid and rely on other means to heat their homes. As I know in Cornwall, fuel poverty is greater in rural areas than in urban areas and, crucially, it is often deeper, meaning that rural families need to save more money to make sure their energy bills are affordable. This amendment says that it is vital that a fast and easy way to use this system be set up to get these payments to them. Amendment 6 would ensure that payments are made directly to consumers’ bank accounts, which is clearly the quickest and easiest way to make the biggest difference to rural and off-grid customers. Therefore, I hope the Government will be able to accept this amendment, but I certainly hope that the Minister will be able to give more detail and a timeframe so that these particular consumers know their future. I beg to move.

[Lord Lennie (Lab)]

My Lords, our Amendments 37 and 38 seek to backdate the electricity and gas price reduction scheme to 8 September, which was the day the Government first announced the energy price guarantee. Apart from anything else, this would produce money to be passed on to customers’ bills. It may seem a small change, but it would be extremely popular among all UK households.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Lords, Lord Rooker, Lord Teverson, Lord Lennie and Lord McNicol of West Kilbride, for their amendments, which seek to make changes to the schemes to reduce energy bills—namely the alternative fuel payments, the domestic energy price guarantee and the energy bill relief scheme.

First, turning to Amendment 5 tabled by the noble Lord, Lord Teverson, on the energy bill relief scheme, I am pleased to note that he agrees with the decision to extend the eligibility date for customers on fixed-term contracts back to 1 December 2021, which my noble friend Lord Callanan confirmed in this House on 10 October. This will be implemented in regulations. I can give further reassurance that when the scheme was first announced on 23 September, it stated that all non-domestic customers on variable contracts, as well as deemed and flexible contracts, will be eligible for the scheme. Given that these details have already been published and will be implemented in regulations, the proposed changes to the Bill are unnecessary. I hope that gives the noble Lord the reassurance he was seeking.

I turn to the amendment tabled by the noble Lord, Lord Rooker, which seeks to remove Clause 9. This clause provides for the establishment of the energy bill relief scheme in Great Britain. This scheme will provide a price reduction to ensure that all businesses and other non-domestic customers—for example, charities and public sector organisations such as schools and hospitals—are protected from excessively high energy bills over the winter period. Under the provisions in Clause 9, the Secretary of State may, by regulations, reduce the amount that all eligible businesses and other non-domestic customers would be charged for their gas and electricity. Clause 9 allows for this through the calculation of a notional wholesale price for gas and electricity, referred to as the government-supported price, with a discount being provided which pays the difference between the government-supported price and the wholesale price.

The clause provides for regulations to detail how the Government may calculate this reduction. We intend for the scheme to run initially for a six-month period. Schedule 6 to the Bill allows for the scheme to be extended for up to three further consecutive periods for up to two years. We recognise that the diversity of contracts between suppliers and their non-domestic customers makes implementation of the scheme complex. This clause therefore provides for necessary powers to support successful delivery of all aspects of the scheme, and to allow the Government to respond appropriately to any rapid changes in the market. I therefore ask that Clause 9 stand part of the Bill.

Turning to Amendment 6, tabled by the noble Lord, Lord Teverson, on the alternative fuel payment scheme, households eligible for the domestic alternative fuel payment scheme in Great Britain will receive £100 as a credit on their electricity bill under a similar delivery model to the energy bills support scheme; we are exploring a similar route for Northern Ireland. We understand that consumers are already experiencing significantly increased living costs, and that is why the Government are delivering this support to customers as fast as possible and have committed to delivery of the payment this winter. Requiring that payments be made direct to consumer bank accounts would significantly slow down the ability to deliver, meaning that the target to pay this winter would be unlikely to be met. This Government do not have an established direct relationship with the relevant consumers, and a bespoke delivery scheme would need to be created, which would take significant time.

Delivering the domestic alternative fuel payment as a fixed credit amount via electricity bills will be significantly quicker than other possible routes and means that customers need take no action to receive it. Consumers eligible for the domestic alternative fuel payment but who do not have a relationship with an electricity supplier will receive the £100 via the alternative fuel payment discretionary fund. Details on how to access this fund will be confirmed shortly.

Turning to Amendments 37 and 38, on the domestic energy price reduction scheme, tabled by the noble Lords, Lord Lennie and Lord McNicol of West Kilbride, I thank the noble Lords for their amendments to enable backdating of the electricity and gas price reduction scheme in Great Britain to 8 September. The energy price guarantee was implemented from 1 October so that consumers can expect to pay well below the scheduled increase in the price cap to £3,549 for a typical dual-fuel household. The energy price guarantee has been designed to work in combination with the May 2022 cost of living package to ensure that the most vulnerable households will see little change in their energy costs between last winter and the coming winter. I therefore see no need to alter the operative date of the energy price guarantee schemes. I hope that on this basis, the noble Lords will not feel it necessary to press their amendments.

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[Lord Teverson (LD)]

My Lords, without, I hope, taking away too much tension from the Committee, I am not going to press this amendment so I shall be relatively brief in explaining it. It has an important basis in the Government’s Energy (Oil and Gas) Profits Levy Act. It also has an element of looking at how the Bill and previous schemes discriminate against the renewables industry compared with fossil fuels.

A key element of Amendment 13 is to assess the impact of that date in the levy so that it applies to oil and gas profits incurred since 1 October 2021. The Government’s energy profits levy is effective from 26 May, meaning that profits accrued before that date are outside its scope. It was clear over a year ago that surging profits for the oil and gas companies were in stark contrast to the real struggle faced by ordinary people and small businesses faced with high and soaring energy costs. In fact, it was one year ago today that my right honourable friend Ed Davey MP called for the windfall tax on the profits of oil and gas companies, accompanied in due course by other parties and other parties represented in this House.

If the Chancellor had responded at that time and a levy had been in place from October, it would have raised billions more. If I could just remind the Committee of the profits since then, BP saw profits rise by 138% between quarter 1 of 2021 and quarter 1 of 2022—from £2.6 billion to £6.2 billion; it was similar for Shell. These combined super-profits alone amount to £7.5 billion in the first quarter of 2022. That is £7.5 billion more than they made in the same quarter in 2021. Had those windfall profits had been taxed by the same amount, it would have raised £1.8 billion.

What we are looking for in particular here has to do with the levy. Like proposed new subsection (1) in Labour’s Amendment 14, proposed new subsection (1)(b) in Amendment 13 calls from the removal of allowances in the levy for investment in oil and gas extraction. This is one of the key differences between the revenue cap on renewables and the fossil fuel industry, where there is that huge investment incentive of getting 80% back for investment in—dare I say?—fossil fuels, obviously. That is where we want there to be quality.

We on these Benches know, as do Members from other parts of the House, that renewables, rather than fossil fuels, are really the way forward. The Government have committed themselves to a large amount of investment in offshore wind. We recognise that but we need to keep at least a level playing field in taxation matters between renewables and fossil fuels. I very much believe that we need then to push investment in renewables further forward. I beg to move.

[Lord Lennie (Lab)]

My Lords, the whole question of the energy market is complicated and beset by a series of legislative procedures which can cause confusion. That said, the new clause proposed by Amendment 14 would simply require the Secretary of State to produce a report assessing the impact of removing the investment allowance from oil and gas companies, as set out in the Energy (Oil and Gas) Profits Levy Act, and, in particular, to assess the impact on domestic and non-domestic users. Currently, oil and gas companies receive an 80% rebate on every pound invested but that is not available to renewables or other zero-carbon technology. This appears to tilt the market away from investments in cheaper domestic clean power sources towards oil, gas and fracking.

The proposed new clause would require the Government to assess the revenue and profits of electricity generators and oil and gas producers every six months, to see what the effects would be. Amendment 20 would require the Secretary of State to disaggregate the cost of production of natural gas from the cost of production of other energy sources to reduce the cost of electricity to domestic and commercial consumers. This dates back to when gas was the only game in town for energy companies; now, renewables account for 43% of the generation mix.

Gas prices have increased fourfold since the beginning of 2011, which means that consumers are paying much more for electricity than the average cost of generation across the market. Splitting the market is a likely consequence, by creating a separate pool for cheaper, intermittent, renewable generation and a second for traditional fossil fuel, which in turn could lead to consumers determining when to use cheaper electricity for things such as car charging by timing their usage accordingly. Electricity prices would be determined competitively by companies considering their own boundaries rather than working through gas. I give notice of our attention to move Amendment 14 to a vote.

[Lord Callanan (Con)]

I thank all noble Lords who have tabled amendments in this area, on the energy profits levy, including an amendment that seeks to reduce the costs of electricity to consumers.

I start with Amendment 13, tabled by the noble Lord, Lord Teverson, which would require the Secretary of State to publish a report on the additional revenue that could be raised from expanding the energy profits levy. I shall say something very similar to what I said to the noble Lord, Lord Foster, that all taxes are kept under review, and any changes in tax policy should be considered and announced by the Chancellor, in line with the usual Budget processes. The Treasury view, therefore, is that this amendment is not appropriate for this Bill.

The energy profits levy has been designed with a bespoke tax base, appropriate to respond to the extraordinary global context of high oil and gas prices. The levy is expected to raise substantial revenue while providing companies with a new incentive for investment. It is right that we continue to encourage investment in North Sea oil and gas to strengthen the UK’s vital offshore oil and gas sector and bolster our future energy security. The amendment would also require the Government to produce an estimate of upstream profits expected in the next two years. Such estimates will be highly sensitive to commodity price fluctuations. Given the volatility in prices since last year and that most companies’ out-turn profits are publicly available, it is not clear that producing such an estimate would be a beneficial use of public resources.

I turn to Amendment 14, tabled by the noble Lords, Lord Lennie and Lord McNicol. This amendment requires the Secretary of State to publish a report on the impact of removing the investment allowance in the energy profits levy. The Treasury has made clear its view that it is not for this House to discuss the matters raised by this amendment in relation to this Bill, on the basis that fiscal issues are a matter for the House of Commons. Tax policy changes are an area for the Treasury, which believes that the Chancellor should consider and announce any changes in line with the usual Budget process. Taxation on the profits of oil and gas producers is not in scope of this Bill. The energy profits levy, introduced under the Energy (Oil and Gas) Profits Levy Act 2022, has been in place since May. It is not standard for the Government to publish assessments of the economic impacts of measures that they are not introducing. The Government already monitor the UK oil and gas sector; data on upstream production is published regularly on GOV.UK. It is not clear how a report on the impact of a hypothetical change would be a beneficial use of public resources.

I turn to Amendment 15, also tabled by the noble Lords, Lord Lennie and Lord McNicol, which would require the Secretary of State to publish an assessment of the revenue and profits of electricity generators and oil and gas producers every six months. The profits of oil and gas producers are not in scope of these measures but are subject to the energy profits levy, which has been in place since May. The out-turn revenue and profits of most electricity generators are already in the public domain, so I do not believe this amendment is necessary. The objective of the Energy Prices Bill is to protect consumers from very high energy prices. We recognise that we must strike a balance that is fair to generators, achieves value for money for consumers and maintains investor confidence. That is why it is appropriate that the House gets the chance to debate fully the first set of regulations made under the temporary cost-plus revenue limit.

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Moved by

[Lord Lennie]

14: After Clause 15, insert the following new Clause—
“Report on additional expenditure treated as incurred for purposes of section 1 of the Energy (Oil and Gas) Profits Levy Act 2022
(1) The Secretary of State must, within six months of the day on which this Act is passed, publish and lay before Parliament a report on the effect of removing the allowance under section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022.(2) The report must set out projections of the effect of the reduction set out in subsection (1) on domestic and non-domestic energy bills.”Member’s explanatory statement
This new Clause requires the Secretary of State to produce a report assessing the impact of removing the investment allowance for oil and gas companies as set out in the Energy (Oil and Gas) Profits Levy Act, and in particular to assess the impact on domestic and non-domestic bills.

[Lord Lennie (Lab)]

My Lords, the welcome part of the Minister’s statement was the consideration of disaggregating gas from electricity. We welcome that and look forward to seeing the outcome. But Amendment 14 simply asks for a report to be produced; it is not trying to interfere in Treasury decisions or to do anything about fiscal policy. It is simply trying to find out whether the market is distorted and, if it is, by how much. I wish to test the opinion of the House on this amendment.

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Moved by

[Lord Lennie]

25: Clause 22, page 21, line 1, after “may” insert “by regulations”
Member’s explanatory statement
This amendment and others in the name of Lord Lennie make the powers in Clause 22 subject to affirmative parliamentary procedure including a sunset Clause.

[Lord Lennie (Lab)]

My Lords, I just want to remind the House of the warnings and the contribution from the noble Lords, Lord Rooker and Lord Cunningham, about the Government ignoring the recommendations of the DPRRC as against the normal practice of this House. I beg to test the opinion of the House.