Energy Bill: Committee Stage Report
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Energy Bill: Committee Stage Report RESEARCH PAPER 10/14 17 February 2010 This Paper summarises the House of Commons Second Reading and Committee Stage proceedings of the Energy Bill. It supplements Research Paper 09/88 which describes the background content of the Bill in detail. The Bill received its Second Reading on 7 December 2009. It was not amended in Committee. The Bill is divided into three main parts. The first part would introduce a carbon capture and storage (CCS) financial assistance scheme to support the construction of up to four UK CCS demonstration projects, to be chosen in a competition. The second part relates to schemes for reducing fuel poverty; it would introduce mandatory social price support, designed to lower energy bills for the most vulnerable, which would replace the current voluntary agreement which expires in 2011. The third part relates to the regulation of gas and electricity markets: it would make clear explicitly what Ofgem should include in its assessment of how to protect energy consumers; it would make it easier for Ofgem to tackle exploitation of market power by electricity generation companies in specified situations; and it would increase Ofgem’s power to fine companies. 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It should not be relied upon as being up to date; the law or policies may have changed since it was last updated; and it should not be relied upon as legal or professional advice or as a substitute for it. A suitably qualified professional should be consulted if specific advice or information is required. This information is provided subject to our general terms and conditions which are available online or may be provided on request in hard copy. Authors are available to discuss the content of this briefing with Members and their staff, but not with the general public. We welcome comments on our papers; these should be e-mailed to [email protected]. ISSN 1368-8456 Contents Summary 1 1 Introduction 2 2 Second Reading Debate 2 3 Committee Stage 5 3.1 Consideration of clauses 5 Carbon Capture and Storage 5 Schemes for reducing fuel poverty 6 Regulation of gas and electricity markets 9 New clauses 12 Appendix 1 – Members of the Public Bill Committee 16 Appendix 2 – Sittings and Evidence 17 RESEARCH PAPER 10/14 Summary In the Second Reading, the main focus of concern from the opposition parties was on what was not included in the Bill, rather than what was actually in it. The Bill was also criticised for the volume of further secondary legislation that would be needed because of the number of enabling powers contained in the Bill. There were 12 sittings of the Committee, with oral evidence taken at the first four sittings. The passage of the Bill through the Committee was largely consensual and Ministers were often able to provide reassurance to opposition party concerns. Only two amendments to the Bill itself were pushed to division and both were defeated. Six new clauses were pushed to division and all were defeated. There were no Government amendments and the Bill remains unchanged. The debate on the first part of the Bill, covering Carbon Capture and Storage (CCS), focused on whether it would be appropriate to include renewable energy suppliers in the CCS financial assistance scheme and whether money for the scheme would be available from receipts from the EU Emissions trading scheme. A division was held on an SNP amendment which would remove the requirement that CCS demonstration projects should have to be from coal-fired plants. The Conservative and Liberal Democrat Party spokespeople both supported the amendment. The proceedings on the second part of the Bill, on schemes for reducing fuel poverty, focussed on how to increase energy efficiency in homes. There was also a debate about whether schemes to assist people in fuel poverty should be extended to those whose homes are not connected to the gas grid and therefore rely on either oil or liquid petroleum gas (LPG) as heating fuel. A Liberal Democrat amendment on this issue was supported by the Conservatives, but defeated on division. The debate on the final part of the Bill was wide-ranging. Among the topics discussed were: what the focus of Ofgem’s priorities should be and how they should relate to gas storage; whether there should be a minimum notice period that energy suppliers should be required to give customers of changes to tariffs; whether exploitation of the electricity transmission network balancing system needed to be addressed with legislation; and whether schemes to adjust energy charges for disadvantaged customers should be extended to oil and LPG customers, and if such schemes should take account of how someone pays for their energy. Six new clauses were pushed to division. These related to proposals for: an energy performance standard setting maximum levels of carbon dioxide from electricity generation plants; a specific scheme to provide households with energy efficiency measures; a requirement for the Chairman and majority of Ofgem’s board to be lay members and for Ofgem to hold board meetings in public; a new body to be responsible for CCS pipelines and associated infrastructure; a roadmap for a timetable of delivery for new CCS demonstration projects; and a mechanism to create a minimum price of carbon. 1 RESEARCH PAPER 10/14 1 Introduction The Energy Bill was introduced in the House of Commons on 19 November 2009 and had its 1 Second Reading on 7 December 2009. The Bill was committed to a Public Bill Committee, with proceedings to be concluded no later than 21 January 2010. There were 12 sittings of the Committee between 5 to 21 January, with oral evidence taken at the first four sittings. Detailed information on the provisions in the Bill and the background to them can be found in Library Research Paper 09/88 prepared for Second Reading. Further material and links to the proceedings on the Bill can be found on the Parliament website Energy Bill page and for Members and their staff, on the Bill Gateway pages. 2 Second Reading Debate The Secretary of State for Energy and Climate Change, Edward Miliband, set out the rationale behind the Bill. He said that markets by themselves could not put a price on carbon emissions or bring forward the investment and industrial policy needed to provide the right energy mix for the future.2 He summarised the key aims of the Bill: • First, to clean up our energy supplies, it legislates for a levy to provide unprecedented investment in clean coal. • Secondly, to improve the deal for consumers, it strengthens the power of the regulator and ensures that it must be proactive for the consumer. • Thirdly, to deliver fairness, we are introducing compulsory cut-price energy for the most vulnerable customers.3 The Secretary of State said that the levy for clean coal technology on electricity suppliers was expected to provide “up to £9.5 billion over the coming two decades.”4 He also confirmed the timetable: the levy would come into force in 2011; in 2010 there would be a competition for three additional projects for Carbon Capture and Storage (CCS); he hoped for widespread deployment of CCS by 2020.5 He confirmed that the Bill would introduce a compulsory scheme to help vulnerable customers with energy tariffs, which would replace the current voluntary scheme. He also pledged that the Government “will increase the total amount of help, up from the level of £150 million in the final year of the current voluntary agreement.”6 In regard to protection for consumers more widely, Mr Miliband declined requests to refer the relationship between the consumer and wholesale energy prices to the Competition Commission; instead, the Government would “think about a policy response” and that Ofgem would publish a report “early” in 2010.7 The Conservative Shadow Secretary of State for Energy and Climate Change, Greg Clark supported parts of the Bill in principle. Specifically: the Bill’s clarification of Ofgem’s objective to protect consumer interests; the steps to ensure security of energy supply; and the Bill’s 1 HC Deb 7 December 2009 cc 41-122 2 HC Deb 7 December 2009 c44 3 HC Deb 7 December 2009 c44 4 HC Deb 7 December 2009 c44 5 HC Deb 7 December 2009 c44 6 HC Deb 7 December 2009 c47 7 HC Deb 7 December 2009 c45 2 RESEARCH PAPER 10/14 extension of the time limits in which Ofgem can impose penalties for breach of licence conditions.8 On the proposed levy to pay for CCS technology however, Mr Clark said that the Conservatives would support it only if “it indeed turns out that the funds from the [European] emissions trading scheme have been exhausted.”9 He also questioned the design of the levy, expressing concern that suppliers of renewable electricity would have to contribute to the levy even if they did not generate any carbon dioxide emissions.