PARLIAMENTARY DEBATES HOUSE OF COMMONS OFFICIAL REPORT GENERAL COMMITTEES Public Bill Committee Energy BILL WRITTEN EVIDENCE PUBLISHED BY AUTHORITY OF THE HOUSE OF COMMONS LONDON – THE STATIONERY OFFICE LIMITED PBC (Bill 100) 2012 - 2013 © Parliamentary Copyright House of Commons 2013 This publication may be reproduced under the terms of the Open Parliament Licence, which is published at www.parliament.uk/site-information/copyright/ Enquiries to the Office of Public Sector Information, Kew, Richmond, Surrey TW9 4DU; e-mail: [email protected] Distributed by TSO (The Stationery Office) and available from: Online The Houses of Parliament Shop www.tsoshop.co.uk 12 Bridge Street, Parliament Square London SW1A 2JX Mail, Telephone, Fax & E-mail Telephone orders: 020 7219 3890 TSO General enquiries: 020 7219 3890 PO Box 29, Norwich NR3 1GN Fax orders: 020 7219 3866 Telephone orders/General enquiries: 0870 600 5522 Email: shopwparliament.uk Order through the Parliamentary Hotline Lo-call 0845 7 023474 Internet: Fax orders: 0870 600 5533 http://www.shop.parliament.uk E-mail: customer.serviceswtso.co.uk Textphone: 0870 240 3701 TSOwBlackwell and other Accredited Agents 26313 Energy Bill Contents British Chambers of Commerce (EN 02) Opus Energy (EN 03) ESB International (EN 04) IPPR (EN 07) E.ON (EN 10) Energy UK (EN 11) Vattenfall (EN 12) Prof Catherine Mitchell (EN 13) WWF (EN14) Dalestone Energy (EN19) UK Youth Climate Coalition (EN 20) RWE npower (EN 21) National Grid (EN 22) DONG Energy (EN 23) Solar Trade Association (EN 24) Department for Energy and Climate Change (EN 25) Dr Nick Eyre, University of Oxford (EN 26) Renewable Energy Association (EN 27) Independent Renewable Energy Generator (IREGG) (EN 28) Carbon Capture and Storage Association (CCSA) (EN 29) Centre for Energy Policy and Technology, Imperial College London (EN 30) Sedgemoor District Council (EN 31) Statkraft (EN 32) Nuclear Industry Association (NIA) (EN 33) E.ON supplementary evidence (EN 34) EEF (EN 35) Cornwall Energy (EN 36) Royal Academy of Engineering (EN 37) The Co-operative Group (EN 38) Energy Bill Written evidence Memorandum submitted by British Chambers of Commerce (EN 02) INTRODUCTION 1. The British Chambers of Commerce (BCC) is the national body for a powerful and influential network of Accredited Chambers of Commerce across the UK; a network that directly serves not only its member businesses but the wider business community. Representing over 100,000 businesses that together employ more than five million employees, every Chamber sits at the heart of its local community. SUMMARY 2. We welcome the opportunity to submit evidence to the Public Bill Committee on the Energy Bill. Our comments relate to Part One, Electricity Market Reform, and to Part Five, Consumer Redress. 3. We support the main objectives of the Bill and hope that it will complete its passage through Parliament without unnecessary delays. The sooner the Bill receives Royal Assent the better for the future energy security of the UK. Part One: Electricity Market Reform 4. The Bill must ensure that the energy market delivers affordability, certainty and security for business. This is what we found were the key business requirements when we conducted a major survey of Chamber members during July/August 2012. 5. Almost 3,500 businesses responded to the survey. The survey received responses from businesses of all sizes and across the manufacturing and services sectors. 6. Respondents were generally supportive of the major reform of the electricity market that the Government is currently undertaking. Almost half (47%) believe that it should help UK competiveness. Only 10% thought it would have a negative impact. 7. However, one element of the reform, the Carbon Floor Price, is a cause of concern. Over a quarter (27%) think it will negatively impact on competitiveness. While the Carbon Floor Price is not part of the Energy Bill, we believe that its potential cost to business should be borne in mind by Committee members when scrutinising the Bill. 8. Elsewhere the survey found that businesses believe that energy security issues will become a major concern in the future, with 59% of large businesses, 44% of medium-sized businesses, and 38% of small businesses already worried about their future energy supply; disruption to supply is currently a reality for some businesses, with 10% experiencing a cut in their energy supply on five or more occasions in the past three years. 9. With nearly 40% of businesses feeling that rising costs have adversely affected their growth and 90% believing that the UK requires a diverse energy mix to avoid future supply problems, it is clear that action is needed now. Therefore we support the main objective of the Bill. We believe that the Bill as it currently stands should deliver the required certainty for investors and help guarantee future energy security. 10. The announcement that energy intensive firms will be protected from some of the additional cost was welcome and goes some way to addressing our affordability concerns. However, we still feel the Government could explore the possibility of widening the list of electro intensive industries that should be protected. 11. We support the Government preferred choice of the Contracts for difference (CFD) Feed-in Tariff for attracting investment in low carbon forms of energy. The CFD has a number of advantages over other Feed-in Tariff designs that were being considered. As it is a long-term contract it will provide greater revenue certainty; it is less complex than other designs; it provides greater security from price volatility, and thereby reduces the commercial risks faced by investors in low carbon projects. Lower commercial risks should in turn lower the cost of raising finance, and, this should lead to the least additional cost to consumers. 12. Prior to the publication of the Bill a key concern that we heard from our members was over the issues of the counterparty. Therefore we welcome the creation of a Government-owned company to act as a single counterparty. This should further add to investor certainty. 13. However, as the Bill only sets out the powers to be given to the Government to introduce the various market mechanisms, we will have to wait for the regulation to fully understand the details of how the counterparty will work in practice. Investors would be keen to see the detail as soon as possible. 14. The main certainty that the Government must now provide is the strike price for different technologies. We would hope this is revealed as soon as possible and after Government has consulted widely with the nuclear and renewable industry. Eventually we would like to a move towards a situation where the price is set by the market. Energy Bill Part One: Capacity Mechanism 15. As our survey found energy security is a major concern for business. Therefore we have always been mindful to support policies, such as the capacity mechanism, that will help ensure a reliable electricity supply for business consumers. We can see the benefit of moving from the current arrangement, whereby generators are only paid for the electricity they produce, to an arrangement whereby generators receive a payment to ensure they have sufficient capacity to meet future peak electricity demand and protect consumers against the risk of supply shortages. 16. While we support having the first capacity auctions in 2014, industry will need further certainty around the design of the Capacity Mechanism and it is clear from the lack of detail in the Bill that work on the Capacity Mechanism is less advanced that on other parts of the electricity market reform. Full details won’t be known until we see the regulations and we would encourage the Government to ensure the final detailed design proposals are published no later than May 2013. Part One: Possible Amendments 17. We do not support amending the Bill to include a decarbonisation target. The decision to wait until 2016 we feel is a sensible one. We hope the debate on a target does not cause unnecessary delays to the Bill reaching the Statute books. 18. We feel that there are currently enough targets in place to ensure the UK adequately reduces it greenhouse gas emissions and to allow the UK to play a leading role in achieving a global and comprehensive legally- binding climate change agreement. Part Five: Miscellaneous: Consumer Redress 19. We welcome the Government commitment in their response to the consultation on a proposed new power for Ofgem to compel regulated energy businesses to provide redress to consumers that smaller businesses would be within scope for redress. We would like see the Minister reaffirm this commitment during the committee proceedings and to clarify what is meant as a smaller business. 20. The level of protection for businesses in the energy market has long been a concern for our members. In comparison to the domestic sector the safeguards in place for businesses are relatively weak, even though smaller business customers, in particular, engage in the energy market in a similar way to households. We believe that unless it can be demonstrated otherwise, all micro and small businesses should receive the same level of protection as domestic consumers. Clearly smaller businesses must have access to redress if they suffer loss, damage or inconvenience as a result of the breach of conditions by energy companies. CONCLUSION 21. As with all enabling legislation, the Bill only sets out the powers to be given to the Government to introduce the various market mechanisms. It is difficult to fully understand the impact of the Bill until all the details are revealed through regulations. 22. It is our view that this Bill will be one of the most important pieces of legislation during the lifetime of the current Parliament.