Energy Bill gives CMA powers to review network mergers

The competition watchdog is being equipped with new powers to review electricity and gas network company mergers in the government’s new Energy Security Bill.

Amidst wider turmoil within government as a succession of ministers resigned, the Department for Business, Energy and Industrial Strategy announced on Wednesday morning (6 June) the introduction of the legislation to Parliament.

The wide-ranging bill includes provisions to extend the Competition and Markets Authority’s powers under a new Energy Network Special Merger Regime, which the government claims could save consumers up to £420 million over ten years.

The legislation also features measures to create a new governance framework for energy codes and enable the licencing of multi-purpose interconnectors, potentially reducing the number of cables, landing points, and substations required to bring electricity onshore from offshore generators.

The bill has been introduced to enact a number of government commitments from last year’s Energy White Paper and the British Energy Security Strategy released in April.

They include a proposal in the Energy White Paper to enable smaller suppliers’ obligations under the ECO (Energy Company Obligation) scheme to be bought out. The new buy-out mechanism is designed to facilitate the widening of ECO to smaller suppliers without adding disproportionate burdens in terms of delivering the scheme.

The bill additionally features measures to:

• Extend the energy price cap beyond its current cut-off date of 2023
• Widen Ofgem’s remit to the regulation of heat networks
• Establish a new independent Future System Operator
• Introduce business models for carbon capture and storage (CCS) and hydrogen production, and establish an economic regulation and licencing framework for CO2 transport and storage networks
• Enable the delivery of a large village hydrogen heating trial by 2025
• Classify electricity storage as a “distinct subset” of generation
• Establish a market-based mechanism to scale up domestic heat pump production and bring down costs
• Enable heat network zoning in England
• Increase competition for onshore electricity networks
• Introduce new protections from cyber threats for smart appliances
• Enable the government to amend to the EU-derived Energy Performance of Buildings regime

Business and energy secretary Kwasi Kwarteng said: “To ensure we are no longer held hostage by rogue states and volatile markets, we must accelerate plans to build a truly clean, affordable, home-grown energy system in Britain.

“This is the biggest reform of our energy system in a decade. We’re going to slash red tape, get investment into the UK, and grab as much global market share as possible in new technologies to make this plan a reality.

“The measures in the Energy Security Bill will allow us to stand on our own two feet again, reindustrialise our economy and protect the British people from eye-watering fossil fuel prices into the future.”

Energy UK director of advocacy Dhara Vyas commented: “The Energy Security Bill will help to ensure the UK’s long-term energy supply and a cheaper and cleaner system overall.

“With the cost of energy reaching unprecedented levels it’s right that the government urgently legislates to protect consumers, whilst also delivering frameworks and regulation to support the decarbonisation of the UK economy so that it reduces bills in the long term.

Renewable UK deputy chief executive Melanie Onn said: “The measures set out in the bill will accelerate the UK’s transition to energy independence by enabling us to deploy innovative home-grown renewable technologies at scale. These proposals will help consumers by cutting expensive gas imports and replacing them with locally generated clean power which we control.”