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25 Oct 2022

Government introduces Energy Prices Bill

Government introduces Energy Prices Bill
The UK government has introduced an Energy Prices Bill, putting into law support to help businesses, households and others with energy costs this winter. Without the launch of the schemes, businesses and consumers had been left facing increasing financial turmoil, with energy bills estimated to increase to as high as £6,500 before the government stepped in. Recently announced support will see a typical household pay £2,500 a year for energy, while businesses will be paying less than half of predicted wholesale costs this winter. The Energy Prices Bill, introduced in Parliament on 12 October, is said to provide the legislative footing needed to ensure that people and businesses across the UK receive support with their energy bills this winter through the Energy Price Guarantee for domestic consumers and Energy Bill Relief Scheme for businesses and non-domestic properties. This includes essential measures that enable the UK government to deliver comparable schemes in Northern Ireland and legislation that will require landlords and heat network operators to pass benefits through to tenants. Low-carbon electricity generation from renewables and nuclear will be key to securing more low-cost homegrown energy and the government is supporting continued investment in the sector, including through The Growth Plan. Currently in the UK market, wholesale electricity prices are set by the most expensive form of generation – presently gas-fired generation, which are significantly higher in light of Russia’s appalling invasion of Ukraine and Putin’s subsequent weaponisation of gas supplies. Low-carbon electricity generators are therefore benefiting from abnormally high prices, while consumers are having to pay significantly more for energy generated from renewables and nuclear, even though they often cost less to produce. To further protect consumers, new powers to help sever the link between high global gas prices and the cost of low-carbon electricity have also been introduced through a new temporary Cost-Plus Revenue Limit in England and Wales. This will reduce the impact of unprecedented wholesale prices on consumers and the taxpayer by introducing a revenue limit, curbing the amount generators can make. The precise mechanics of the temporary Cost-Plus Revenue Limit will be subject to a consultation to be launched shortly. The government has been working closely with industry on the detail of the proposal, ahead of it coming into force from the start of 2023. It will ensure consumers pay a fair price for low carbon energy and has the potential to save billions of pounds for British billpayers, while allowing generators to cover their costs, plus receive an appropriate revenue. Business and Energy Secretary, Jacob Rees-Mogg, said: Businesses and consumers across the UK should pay a fair price for energy. With prices spiralling as a result of Putin’s abhorrent invasion of Ukraine, the government is taking swift and decisive action. We have been working with low-carbon generators to find a solution that will ensure consumers are not paying significantly more for electricity generated from renewables and nuclear. That is why we have stepped in today with exceptional powers that will not only ensure vital support reaches households and businesses this winter but will transform the United Kingdom into a nation that offers secure, affordable and fairly-priced home-grown energy for all. Energy Prices Bill The Bill will introduce powers to enable the following: Energy Bill Relief Scheme The Energy Bill Relief Scheme will enable the government to provide financial assistance on energy bills for all eligible non-domestic customers, including businesses, charities and public sector organisations. This took effect on 1 October 2022. Energy Price Guarantee The Energy Price Guarantee will ensure that a typical household in the United Kingdom pays around £2,500 a year on their energy bill, depending on their use, for the next 2 years, from 1 October 2022. Alternative Fuel Payment This scheme is intended to deliver a one-off payment of £100 to UK households who are not on the mains gas grid and therefore use alternative fuels, such as heating oil, to heat their homes. More detail on non-domestic consumers will be set out shortly. Northern Ireland Energy Bills Support Scheme Powers in the Bill will provide a robust basis to allow the government to make payments and deliver NI EBSS, which will provide £400 of support to households in Northern Ireland this winter. Powers will enable a similar delivery model to the Energy Bills Support Scheme in Great Britain, in respect of using the existing regulatory regime to enforce and provide assurance to the government on delivery. Energy Bills Support Scheme Alternative Fund This scheme is intended to provide the £400 of support for households across the UK that would otherwise miss out on the Energy Bills Support Scheme, as they do not have a domestic electricity contract. The Alternative Funding will be made available for this winter, with an announcement on this in due course. The Bill will provide powers to deliver the funding through local authorities. Heat network support Powers in the Bill will ensure that heat networks benefiting from the Energy Bill Relief Scheme pass through cost savings to their consumers. The Bill provides for the appointment of an Alternative Dispute Resolution body which will handle complaints raised by consumers against their heat network if it has not complied with passthrough requirements. Pass-through requirements on intermediaries This legislation is intended to ensure support from the Energy Price Guarantee, Energy Bill Support Scheme, or Energy Bill Relief Scheme, are received by the end user in cases where intermediaries procure energy on their behalf in accordance with the terms of regulation. For example, the legislation will require landlords to pass benefits to through tenants with further details of the requirements under this legislation to be set out shortly. Cost-Plus Revenue Limit The government is taking steps to break the link between abnormally high gas prices and how much revenue low-carbon electricity generators receive. This will allow consumers to pay a fair amount for their electricity, and ensure electricity generators are not unduly profiting from the energy crisis caused in part by Russia’s invasion of Ukraine. The government recognises the importance of dispatchable and baseload generation for security of supply. The low-carbon technologies that can deliver these types of power do tend to have higher input costs (such as biomass and nuclear) and this is being considered as part of the detailed policy design. Contracts for Difference The government is also legislating for powers that would allow them to consider running a voluntary Contracts for Difference process for existing generators to take place in 2023. A voluntary contract would grant generators longer-term revenue certainty and safeguard consumers from further price rises.
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