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Energy Bills Discount Scheme Regulations 2023

Energy Bills Discount Scheme (Northern Ireland) Regulations 2023

Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023

Energy Bills Discount Scheme Pass-Through Requirement Regulations 2023

Energy Bills Discount Scheme Pass-Through Requirement (Heat Suppliers] Regulations 2023

Debated on Monday 22 May 2023

The Committee consisted of the following Members:

Chair: Mrs Pauline Latham

† Afolami, Bim (Hitchin and Harpenden) (Con)

† Bacon, Mr Richard (South Norfolk) (Con)

† Baron, Mr John (Basildon and Billericay) (Con)

† Brennan, Kevin (Cardiff West) (Lab)

† Burgon, Richard (Leeds East) (Lab)

† Carden, Dan (Liverpool, Walton) (Lab)

† Djanogly, Mr Jonathan (Huntingdon) (Con)

† Evans, Dr Luke (Bosworth) (Con)

† Greenwood, Lilian (Nottingham South) (Lab)

† Hollern, Kate (Blackburn) (Lab)

Mahmood, Mr Khalid (Birmingham, Perry Barr) (Lab)

† Maynard, Paul (Blackpool North and Cleveleys) (Con)

† Morris, James (Halesowen and Rowley Regis) (Con)

† Solloway, Amanda (Parliamentary Under-Secretary of State for Energy Security and Net Zero)

† Stephenson, Andrew (Lord Commissioner of His Majesty's Treasury)

† Stevenson, John (Carlisle) (Con)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

Huw Yardley, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Monday 22 May 2023

[Mrs Pauline Latham in the Chair]

Energy Bills Discount Scheme Regulations 2023

With this it will be convenient to consider the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 (S.I., 2023, No. 454); the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 (S.I., 2023, No. 464); the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (S.I., 2023, No. 463); and the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (S.I., 2023, No. 455).

It is a great pleasure to serve under your Chairmanship, Mrs Latham. The regulations were laid before the House on 25 April 2023, and I will refer to them collectively as the EBDS regulations.

The Government responded decisively to the unprecedented rise in energy prices caused by Putin’s brutal invasion of Ukraine by delivering critical bill support to households, businesses and other non-domestic energy consumers. More than £7 billion of support has been delivered by the energy bill relief scheme alone. That equates to approximately £35 million a day, and it has helped many businesses to keep the lights on.

The Government’s emergency legislation paved the way for the support package to be delivered rapidly across the entire United Kingdom. The Energy Prices Act 2022 was introduced in Parliament on 12 October 2022 and provided the legislative footing needed to ensure that the Government could deliver much-needed support to UK businesses through the energy bills discount scheme.

These regulations are needed to implement and operationalise the energy bills discount scheme. That follows the energy bill relief scheme, which ended on 31 March, and it ensures continuity of support to cover energy consumed between 1 April 2023 and 31 March 2024. Although wholesale energy prices have fallen since their peak, many consumers may still be exposed to higher bills and be in need of support, and the scheme takes that into account. The purpose of the regulations is to reduce the charges for electricity and gas supplied by licensed and licence-exempt energy suppliers to eligible non-domestic customers, and to make payments to suppliers in respect of those reductions in Great Britain and Northern Ireland.

Each statutory instrument is a replacement for an earlier set of regulations that implemented the original EBRS. They ensure that any end user receiving energy that is supplied with the benefit of these schemes through an intermediary will get a “just and reasonable” share of that benefit. Without such intervention, non-domestic customers would no longer be provided with support. Instead, they would be exposed to the full impact of high wholesale market prices. In order to protect all eligible customers from excessively high energy bills, the EBDS will run for a 12-month period from 1 April 2023 to 31 March 2024.

I will now turn to the detail, starting with the Energy Bills Discount Scheme Regulations 2023.

I want to raise an issue that has come up a number of times in my constituency. Residents in social housing are having to pay more for the electricity and gas that fuels things in communal areas, such as lighting. That is because housing associations have to buy that at a commercial rate. They then pass the cost on to residents, and sometimes it is four or five times higher than the rates that residents pay for their personal energy consumption. Is there anything in the regulations to address that? If there is not, will the Minister write to me to say whether the Government are going to do anything about the extortionate rises for residents in social homes in my constituency?

I thank the hon. Member for that good point. I will come on to exactly what this Bill is hoping to address, but I encourage him to write to me. I am also happy to have a face-to-face meeting.

I turn to the detail. The regulations set out that, with a few exceptions, all domestic customers with electricity and gas contracts from both licensed and licence-exempt non-domestic energy suppliers will be eligible for a discount when the wholesale element of their contract is above a certain level. Licence-exempt supply includes energy taken from the public electricity or gas grid, or received via wire or pipe from a licence-exempt provider, where the customer is charged prices pegged to wholesale prices.

The Energy Bills Discount Scheme regulations for Great Britain and the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 provide for three elements of the scheme for end users of licensed suppliers, and the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 replicate them for end users of licence-exempt suppliers.

The first element is a baseline per-unit discount applicable to all non-domestic customer energy bills throughout the scheme’s duration. That discount will be applied if wholesale prices are above a certain price threshold.

The second element is that a higher rate of relief will be provided to non-domestic customers that carry out a substantial part of their UK activities in certain energy and trade-intensive sectors, following a review of the operation of the previous energy bill relief scheme. Those industries have been identified as being less able to pass through their increased energy costs to customers because of international competition. As with the baseline element of the scheme, the discount is applied if wholesale prices are above a certain level.

I thank the Minister for giving way. I raised this in the House some time ago at business questions. Am I right in saying that the energy-intensive element will cover things such as libraries, museum activities, the operation of historical sites and buildings, and similar visitor attractions such as botanical and zoological gardens, but not recording studios, which use a great deal of energy and are subject to international trade and competition? If that is the case, why is the Minister favouring making penguins eligible but not Arctic Monkeys?

I thank the hon. Gentleman for the question. I know of his keen interest in production studios, because we have had conversations about this before. This is for the energy and trade-intensive industries that will be receiving the additional payment. However, I am of course really happy to have a conversation, and I can assure him that I have been meeting with all stakeholders to discuss such matters.

The EBDS regulations cover the process by which the energy supplier is reimbursed by the Secretary of State for discounts that it gives. The EBDS (Northern Ireland) regulations prevent end users who are outside Northern Ireland from receiving the discount to their bills.

The EBDS regulations cover essential operational matters, including information and reporting obligations, enforcement powers and powers to impose civil penalties in respect of missing or defective declarations. The EBDS (Non-Standard Cases) regulations support the operation and delivery of grant funding to customers that receive gas or electricity from licence-exempt suppliers. They provide the Secretary of State with powers to obtain information from those involved and imply some terms into the contracts to help the scheme work more smoothly. Additionally, the regulations allow for revised EBRS terms, which expand eligibility under the EBRS to include the cohort of non-standard customers who receive their licence-exempt energy via private wire or pipe at a price pegged to wholesale rates.

The Energy Bills Discount Scheme Pass-through Requirement Regulations 2023, the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 and the EBDS (Non-Standard Cases) regulations require certain intermediary businesses—often landlords—that receive a benefit under the scheme, but in turn provide energy to others, to pass a just and reasonable amount of the benefit that they receive to their end users.

The regulations set out obligations on the intermediary, including calculating the amount, providing end users with information about that, and passing on the benefit, as soon as reasonably practicable. They also set out the dispute mechanisms available and provide for a robust enforcement and compliance regime.

Order. We have a Division. If Members will come back as soon as possible, I will suspend this sitting until the Division is over and we are all back.

Sitting suspended for a Division in the House.

On resuming—

To conclude, the EBDS will be a source of critical support for non-domestic customers in the UK, particularly those in energy-intensive sectors, many of which are essential to the national infrastructure. These regulations are crucial for the establishment and effective operation of the schemes. The scheme complements the existing large-scale support that the Government have provided during the energy crisis. I hope the Committee will support the measures and their objectives.

We have been around these houses quite a few times, between us. I cannot remember exactly how many SIs we have had on the energy bill support scheme pass-through requirements—the non-domestic element of the original scheme—but I think it is well into double figures. During that period we have debated a whole range of things relating to those SIs, both positive and negative. The overwhelmingly positive aspect of the SIs has been that they provide the support people need for their bills in these times of great uncertainty and difficulty.

Today we are debating five SIs, which, secure the energy bill discount scheme for non-domestic businesses in Great Britain and Northern Ireland for a further year. The Minister will not be surprised when I repeat my concerns about the likelihood of some people getting the money they are entitled to, in view of the requirements of the SIs. She will recall our discussions about whether there should be a strict legal liability on the intermediaries responsible for the pass-through arrangements. There has been a further development in the arrangements for the energy ombudsman to become involved in matters of dispute, but he or she has no legal recourse to enforce payments. We still lack a strict legal liability for those whom the legislation makes responsible for passing through payments to the right people. I do not think we will profit greatly by having a long debate about that— I do not think we will resolve it further—but I note that I am still not entirely satisfied.

I am puzzled about how the new scheme fits in with paragraph 5 of schedule 6 to the Energy Prices Act 2022, which provides for reduced energy charges for non-domestic customers in Great Britain. It is right that the secondary legislation should concern itself with a one-year scheme, particularly for non-domestic customers, bearing in mind that the contracts they enter into do not fall strictly within any particular six-month period. One problem we had in our previous discussions about non-domestic customers was that someone might take out a contract for a non-domestic service that started before the support period and finished halfway through it, or that they might take out a contract halfway through the support period that finished outside it. There could be problems at either end. Those issues seem to have generally been resolved, but a period of a year is a more approachable proposition.

The Energy Prices Act sets out a two-year window within which support is to be provided, and states that that support

“may only provide for the reduction of charges for electricity supply that takes place during a period of six months or less;”.

As the explanatory notes to the Energy Bill Discount Scheme regulations state,

“The EBDS takes us up to the end of the third of the four successive periods.”

That means that the Act envisages a maximum of two years in four different tranches of six months. It then states:

“Support under EBDS will be provided for a year (divided into two six month periods), reflecting the limits in the Act.”

Dividing the support into six-month periods reflects the limits in the Act, but it does not make it clear—it is certainly not clear in the secondary legislation that we are debating—whether the superior legislation so limits the provision of support for a period of six months or less that putting forward a proposal that support should be provided for one year does not necessarily count, for legislative purposes.

It may be perfectly in order for the Government to set an aspiration that support should be for one year, but that may not necessarily accord with what the Act says. In order to make that right for a year, we may have to be here, yet again, in six months’ time re-legislating for the second of those two six-month periods.

I would like to know whether today’s proceedings really will be the last word on that support, or whether the proposal for a year’s support is an aspiration that will require us to go around the houses with legislation in six months’ time. If the Minister can clarify that, I will be very happy to support these regulations. In fact, I am happy to support them for the reasons I have outlined; I will not make my support conditional on the Minister’s doing that, because I am sure it will take some clarification. It is important, however, that we make it clear that we have finished legislating to give that certainty, and that as a result of today’s proceedings, we have put to bed for another year the question of price support for non-domestic customers.

It is a pleasure to serve under your chairship, Mrs Latham. I want to go back to a point that I made in an intervention on the Minister and emphasise that I am a little bit befuddled about why particular sectors have been chosen over others. I have read the impact assessment and the explanatory notes, and I have tried to work out why that should be the case. I am focusing on recording studios because I take an interest in and have some knowledge of them, although my questions may well apply to other sectors.

I asked the then Secretary of State for Digital, Culture, Media and Sport on 26 January 2023 about support for the financial viability of recording studios. They have been through some very difficult periods, particularly after covid. I give credit to the Music Producers Guild for their work, and to the Government for their response, to try to enable studios to work through that period. The Minister of State, Department for Culture, Media and Sport, the hon. Member for Hornchurch and Upminster (Julia Lopez), responded to my written question with the sorts of support that might be available, and she said—this is the bit that is pertinent to today’s SIs:

“Since then, the Government announced a new Energy Bills Discount Scheme to help support businesses, like recording studios, to tackle rising energy costs.”

The Minister said, in terms, in her answer, which was submitted at 14.38 on 26 January 2023, that this scheme would be of assistance to recording studios.

I suppose that in a broad sense we could say that about any business, because in the baseline support that the Government are offering, pretty much any business —and, indeed, other non-domestic energy consuming organisations—could be eligible for support under the scheme if energy prices rise above a certain threshold. For the most part, however, that is not what is anticipated in the impact assessments or the explanatory notes, because it is expected, although we cannot be certain, that prices will not rise to a threshold sufficient to trigger that support. That is why the new scheme will offer a lower level of support than was previously available to businesses.

The implication of the DCMS Minster’s answer was that recording studios would be supported, however, and it would seem that that is not the case. As I indicated earlier, although there is no list in the impact assessment or the explanatory notes, if we dig around a bit we can find a list of industrial sectors that will be eligible for the energy and trade-intensive industries scheme under these SIs. I hope that it is up to date; the Minister for Energy Security and Net Zero can correct me if I am wrong. It is a very long list, and it includes all sorts of things that we might expect, such as the mining of hard coal, the manufacture of sugar, the manufacture of beer, the manufacture of other knitted and crocheted apparel, the manufacture of ceramic household and ornamental items, the cold rolling of narrow strip, the processing of nuclear fuel and the casting of steel.

I have worked in the steel industry myself, and I understand why such sectors are likely to be supported. Then there is a sequence of activities eligible for this higher level of support, including the list that I mentioned in my intervention earlier. They include things like libraries, archive and museum activities, the operation of historical sites and buildings and similar visitor attractions, and botanical or zoological garden and nature reserve activities. I am sure that those sectors will be very pleased to be eligible to apply for the higher-rate scheme; that is the one that is not automatic—it has to be applied for. However, I do not understand why those particular sectors are eligible but recording studios are not.

I took the all-party parliamentary group on music to the AIR recording studios in north London some months ago. Just to provide some context, that is one of the largest recording studios in the country; it is along the lines of Abbey Road. It was founded by the late, great Sir George Martin. It is a very major earner of export currency for this country, and a very major consumer of energy; by their very nature, recording studios have a lot of equipment that uses a lot of energy. Furthermore, human beings work in them so they have to be kept cool.

I will give an example. While we were there at AIR studios, we witnessed preparations for a major orchestral session. It might surprise some hon. Members to know that the session was to record not a piece of classical music or even a film score, but the score for a video game. That video game was being produced by Sony. In the control room during our visit, there was an executive over from Los Angeles, visiting AIR to help to set up the whole of that recording session. I asked that executive, “Why would you come to London to do this? You could do it in Los Angeles or in some other jurisdiction. This is not cheap. All of these people are union members. These are very expensive facilities you’ve got here.” His answer, which I think should encourage us all, was, “Because it’s the best place in the world to do this. We like coming here, and we know that what we get here will be of the highest quality.”

Those activities are significant for our trade figures. There is an industry that makes a significant impact on our trade figures—one of the few industries in the country that is a net exporter and earner of foreign currency. We are one of only two countries in the world of which that is true in relation to the music industry. It spends millions and millions of pounds yet is ineligible under the Government’s scheme, despite the high energy costs involved in running a major recording studio of that kind, that we are discussing here today in relation to these statutory instruments.

What I want to understand from the Minister—[Interruption.] I hope the in-flight refuelling will help her explain this to me. What I want to understand is why she would not include recording studios if these other cultural-type businesses are included. All the energy-intensive manufacturers are included on the list and the cultural activities, such as libraries, archives, museums, historical sites, visitor attractions and botanical and zoological gardens, all qualify, but recording studios do not.

If the Minister was able to give me an answer to that question, it might help me to decide to support what, apart from what I have pointed out, could be seen as reasonable actions by the Government to support businesses with their difficult energy bills.

I thank hon. Members for their contributions to this debate. First, I address the question of whether these instruments are the end of the legislation in this area. I sincerely hope so. However, if there is anything to add when we meet tomorrow, I will of course let the hon. Member for Southampton, Test know, but it is very much my clear understanding that they are the end.

I turn to the point made by the hon. Member for Cardiff West about the music industry. I understand his great passion. He indicated very clearly why the industry is so important to the whole United Kingdom. He mentioned that he is very proud of our music industry—I am as well. I will attempt to explain the reason why we have these schemes. If I am unable to give a full enough explanation, as always I will be happy to offer a further meeting. Within the discount scheme, there is the universal level, which I believe is the level originally mentioned by the Department for Digital, Culture, Media and Sport Minister, my hon. Friend the Member for Hornchurch and Upminster. On that level, support will be given across all of the non-domestic industry. That is my understanding of the support that the music industry will be receiving.

Clearly, the energy-intensive industries needed more support based on the energy that they use, and the fact that a lot of the work is international was also taken into account. The list that the hon. Member for Cardiff West referred to was the standard industrial classification list, known as the SIC list. That is the standard that we used to define the energy-intensive industries that were to have the additional discount. If I have not explained that fully, I am happy to have a meeting with the hon. Member at a later date.

The Minister mentions the so-called SIC list. That is an interesting list in so much as it provides, as my hon. Friend the Member for Cardiff West said, a number of categories of energy-intensive industries. Some of those categories are very narrowly drawn, and some are very widely drawn. His point, at least in part, was that some of the categories within the energy-intensive classification for the higher level of funding are very tightly drawn, and therefore they come into that level, whereas others are very widely drawn.

I mentioned the discrepancy between ornamental or leisure gardens and horticulture, which is often very intensive, and between horticulture and agriculture. Clearly, agriculture is outside the energy-intensive industry classification, but because horticulture is classified within agriculture it does not get in, even though it has similarities with things in the energy-intensive list. I wonder whether the Minister will find time, at some stage, to look at the SIC list to see whether it does the job that we think it does when it comes to ensuring that people get the assistance. Energy-intensive industries should be well enough drawn to ensure that we do not have the sort of anomalies that my hon. Friend the Member for Cardiff West thinks we have.

The hon. Gentleman makes an interesting point about the SIC list. That is obviously the list we are using at the moment. We have taken a consistent approach to identifying the most energy and trade-intensive sectors with all the sectors that meet the agreed threshold to be eligible for this support. The Government are committed to continuing to provide essential energy bill support to eligible UK businesses, charities and public sector organisations until April 2024, to help avoid unnecessary financial pressures and job losses resulting from the ongoing situation in the wholesale market.

In addition to the baseline discount for all non-domestic consumers, the new scheme also provides, as we have discussed at length, much-needed targeted support for energy and trade-intensive industries and consumers on heat networks. That additional support will ensure that those most exposed to volatile energy prices and international trade are supported while limiting the fiscal burden on the taxpayer. The methodology ensures that the scheme captures those industries that have been identified as being less able to pass through their increased energy costs to customers because of international competition, as demonstrated by the level of trade intensity, and require an additional level of support. The pass-through requirement sets out how the benefit is passed on to end users in a reasonable and just way. The delivery of this calculation has been designed to ensure that it is not prescriptive but supports all scenarios.

By replicating existing civil enforcement mechanisms, we hope to avoid any complications for end users and provide clarity on how disputes can be raised. My Department has published clear guidance on, both for intermediaries and for end users, that provides detailed information to help those affected. We are keen to ensure that all end users, including those who are vulnerable, receive the benefits of the schemes to which they are entitled. We will continue to review our pass-through requirement communication strategy, including reviewing guidance on and offering engagement sessions to ensure that intermediaries understand their obligations and that customers receive the benefits to which they are entitled. I commend the regulations to the Committee.

Question put and agreed to.


That the Committee has considered the Energy Bills Discount Scheme Regulations 2023 (S.I. 2023, No. 453).



That the Committee has considered the Energy Bills Discount Scheme (Northern Ireland) Regulations 2023 (S.I., 2023, No. 454).—(Amanda Solloway.)



That the Committee has considered the Energy Bills Discount Scheme (Non-Standard Cases) Regulations 2023 (S.I., 2023, No. 464).—(Amanda Solloway.)



That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 (S.I., 2023, No. 463).—(Amanda Solloway.)



That the Committee has considered the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (S.I., 2023, No. 455).—(Amanda Solloway.)

Committee rose.