Draft Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026

Martin McCluskey Excerpts

Tuesday 14th April 2026 General Committees

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

I beg to move,

That the Committee has considered the draft Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026.

It is a pleasure to serve under your chairmanship, Ms Vaz.

This Government are fully committed to fighting people’s corner to tackle the cost of living crisis. Across the energy system and more widely, we are acting on this as a matter of priority. A number of steps were taken in last year’s Budget, and we have since gone further. At the Budget, alongside several positive changes to help working people with the cost of living, the Chancellor announced that we would remove costs from energy bills from this month. I want to be clear what those costs are. First, we are closing the Energy Company Obligation scheme, removing its costs from bills and instead funding home upgrades for energy efficiency via the warm homes plan. Members may recall that recent regulations extended ECO4 by nine months, but only to enable an orderly closure, with no costs on bills, from this month.

Secondly, we transferred 75% of the renewables obligation scheme costs attributable to domestic energy supply to instead be funded by the Exchequer. The core renewables obligation incentive for relevant generators. These were principled decisions to fund more of the investment we need from public spending rather than bills, which is the right and progressive thing to do. It is thanks to those decisions that typical household energy bills fell by 7% or more than £100 from 1 April.

Let me briefly set out how we delivered the removal of the RO costs from bills, before I come on to how the regulations will enable that to continue. Under the RO, energy suppliers purchase certificates from relevant renewables generators, and previously recovered the full cost of those purchases from consumers. From 1 April, suppliers have been required to recover only 25% of those costs from domestic consumers. For domestic consumers on standard variable tariffs, Ofgem’s energy price cap, published on 25 February, factored in reduced policy costs reflecting the RO changes that we are considering this morning. As a result, the price cap has fallen by 7% or £117, to £1,641 per year for a typical dual-fuel customer paying by direct debit. It will remain held down at that level until the end of June.

In addition, the Government issued a legally binding direction to suppliers on 18 March requiring them to also pass on the full savings to domestic consumers on fixed tariffs. With suppliers no longer recovering 75% of the cost of the RO from household energy bills, we are instead providing equivalent monthly grant funding. We acted quickly to deliver this funding and the associated consumer savings, using an existing power in the Energy Prices Act. That power needs to be extended via regulations to avoid its expiry. It is those regulations that we are discussing today.

The regulations do not give the Secretary of State any new powers, but they ensure the spending power we are using to enable the consumer savings remains available. Legally we can extend the time limit on this power only by six months at a time, so the regulations extend them from 25 April to 25 October. While I expect to need to seek a further extension, I can assure members that the Department is working on primary legislation to provide a more permanent solution when parliamentary time allows.

I would like to note that the position is slightly different in relation to Northern Ireland, where the Executive are delivering a comparable policy. I have been working with the Minister for the Economy in Northern Ireland, and at her request we have laid separate regulations to support delivery there.

Before I close, I will say that we are in a different international environment to when the energy bill reduction was planned in the Budget in November. That was noted by the Secondary Legislation Scrutiny Committee in the other place. It is now even more important that we have acted to reduce energy bills by more than £100, and that bills will stay capped down at a lower level until the end of June.

Whatever the challenges that lie ahead, 75% of RO costs will remain off domestic energy bills for the next three years. We have already gone further in supporting vulnerable heating oil consumers in response to events in the middle east, and we continue to monitor those events closely to ensure we are ready to be both responsive and responsible. The regulations are a simple time limit extension, but are essential to the ongoing removal of 75% of RO costs from domestic energy bills and I commend the draft regulations to the Committee.

--- Later in debate ---

[Martin McCluskey]

I will turn first to the comments made by the official Opposition, and the call to scrap the renewables obligation scheme. I want to put it on the record that it is simply not realistic to scrap that scheme. We took a deliberate decision to remove 75% of the RO from bills and to move that on to general taxation. The shadow Minister may oppose that move, but it is a principled decision that we have taken in order to spread the burden of those renewables obligations more widely, to make sure that those with the broadest shoulders are paying more, rather than it falling just on bill payers, and to maintain the incentive for renewable generators in the scheme at the same time.

The shadow Minister will know that the RO supports 25,000 generation stations, which accounts for approximately 30% of UK electricity generation. Abandoning the RO would not just send a signal to industry that we are not a reliable partner for investment but potentially put at risk our electricity generation, which would be deeply irresponsible. We will take responsible action to move this on to general taxation, while at the same time reducing the burden on bill payers, as people would expect the Government to do, not just because of the situation in the middle east but because of the situation that we faced before that with the rising cost of living.

I deeply admire the work that my hon. Friend the Member for Stoke-on-Trent Central does to advocate for his constituents. I am not aware of him having requested a meeting with me. He may have requested a meeting with either the Minister for Industry or the Minister for Energy. My brief covers only domestic consumers, not industry, but I will happily ask my hon. Friends the Minister for Energy and the Minister for Industry to meet with him to discuss the issues that he has raised in Committee this morning. He made a number of points about the increasing costs on industry, which as Members would expect are being actively discussed in the Department as we establish what support we may be able to offer, not just to domestic consumers, which is what we are dealing with this morning, but to non-domestic consumers.

The Government were taking significant action to reduce bills prior to the situation that has arisen in the middle east, but as hon. Members have mentioned, the rising cost of energy due to what is happening in Iran continues to dominate thinking in the Department. As hon. Members have mentioned, we have already come forward with proposals and help for those using heating oil, and all other contingencies are being kept under review to ensure that we support people through this situation as they face rising energy prices.

Question put and agreed to.