Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2017 — House of Lords, 2017-11-30
Topic: Energy
Christopher Suenson-Taylor (Labour, Centre-left): I thank the Minister for her introduction of the order. She explained it very well; I will not need to detain the House for very long. I am grateful to her for explaining all the technicalities, updates and timetabling As is customary on these occasions, I do not oppose the order. Indeed, I support it, albeit with some comments to make and questions to ask. This side of the House supports the objective behind the order to enable energy-intensive industries to be internationally competitive. They are large, important sectors of the economy; they are of key strategic importance to the UK’s future well-being, not only on their own merit but because they provide key core products needed in many other industries I have a few questions on the order that highlight some possible snags where clarity would be of great assistance. I thank the Minister’s department for the excellent memorandum that it produced for the order, although I was surprised by page 4, which states: "This move will also reduce government spending and is in line with Government’s long term economic plan" I was wondering what long-term economic plan it means. Do the Government have one? The statement is perhaps pertinent where it states that this will reduce government spending. The order removes the cost borne by the taxpayer in the previous, post-event compensation scheme and puts it, via the exemption scheme, firmly on real-time bills, borne by the bill payer—the consumer. That element was keenly debated in the other place, as it transfers the costs from every taxpayer on to only those who are householders. The Government are correct to state that there is a huge cash-flow benefit for the energy-intensive industries to do this, and that it is administratively beneficial. That is recognised and agreed. However, behind the shift from taxpayers to bill payers, I have several questions where this effect should be clarified, so that one can judge whether we should be doing this. At this point in my remarks, I am grateful for the contribution of the noble Lord, Lord Deben—his points were very well made, and echoed by the noble Baroness, Lady Featherstone The memorandum explains that the RO exemption can be valued at £200 million a year to energy-intensive industries. That is further explained as being worth £3.2 million per annum to the average EII—a considerable sum. The memorandum states that the Government wish to expand the list of energy-intensive industries to many competitors in the industry. Does this value of £200 million relate only to the existing exempt participants, and, if so, what would be the total cost should the exemption be expanded? The memorandum explains that the Government are awaiting state aid clearance for this, whereas the Minister in the other place, since echoed by the Minister tonight, seems to suggest that this clearance has been denied by the EU. Is there time to seek other solutions or will the Government merely await the UK leaving the EU The costs of the RO exemption following this order will be redistributed to non-eligible domestic and business users, increasing their bills. The memorandum illustrates the redistribution between households and businesses of various sizes without defining the category of small, medium and large businesses. I presume that there is a continuum of business sizes rather than a banding. Would it not therefore be more transparent to include the increased cost in terms of cost per kilowatt hour? The key aspect to understand is the precise increase in percentages on each business size The memorandum has confused me, as it states on page 4 that to a small business energy user the cash cost average would be £160 per year, yet on page 7 of the impact assessment the figure is put at £4,300 as a best estimate. Can the Minister explain this discrepancy? Whatever the figure, if the average small energy user has their energy bills increased by the introduction of this measure—from what I have been able to research, by a figure of 10% or more—this is a significant amount and should have a bearing on the policy. Is this not a key disbenefit of the policy on the large entrepreneurial section of the economy—the small business sector? Similar arguments could also be applied to medium and large businesses Another key consequence of the transfer from taxpayers to bill payers will include the effect on the poorest of our society: those in fuel poverty. The impact assessment recognises this but makes no monetary impact assessment other than making the statement that, "there will be a very small increase in the number of fuel poor households" This is hardly an appropriate position to take without explaining exactly what this will mean in their numbers, the increase in cost and what percentage that cost is, both with the narrow and the wider definition of those in the energy-intensive industry. Will the Government revisit the ECO and other measures in consequence of this measure This measure is also subject to the levy control framework. When the memorandum states that this matter will reduce government spending, will it result in a reduction of the budget of the levy control framework, allow another important aspect of expenditure to go ahead under the framework, or merely reduce the disputed amount of the overspend of the framework? Can the Minister explain? Are the Government making progress in their review of the levy control framework While I welcome the help this provides to the energy-intensive industries, there seems to be a bit-by-bit implementation of measures, first in relation to the CFD, now in relation to the RO, and soon in relation to the FIT scheme. The Minister indicated in her remarks that there are problems with the FIT scheme and that state aid difficulties could delay it further. However, what is the continuing extra creep on costs transferred to other businesses by the accumulation? Relentless increases on bills to the householder under the standard variable tariff is quite rightly an issue to be addressed. Have the Government thought this through and do they have a consistent and comprehensive plan?