Revenue cap powers ‘inappropriate’ and unjustified

Proposals in the Energy Prices Bill to allow the business and energy secretary of state to delegate powers over suppliers’ charges are “inappropriate” and have no “compelling justification”, according to a parliamentary committee that vets legislation.

The bill, which was debated in the House of Lords under a fast-track timetable designed to ensure it is passed by Wednesday next week, has been widely criticised for giving ministers sweeping powers to over-ride Ofgem and the existing licensing and regulatory regime.

The House of Lords Delegated Powers and Regulatory Reform Committee, which vets the delegation of new powers in legislation, on Wednesday (20 October) published a snap report on the Energy Prices Bill, which includes measures to implement the new revenue cap on low-carbon generation and energy bills support schemes.

Given the bill’s accelerated timetable, the committee said it has not had time to fully scrutinise the legislation but has focused on three clauses, which have raised particular alarm bells.

These include clause 9 of the bill that gives the secretary of state powers to reduce the amounts suppliers can charge non-domestic customers and calculate what level this should be.

The report by the committee, which is chaired by the Conservative former transport secretary of state Lord McLoughlin, says it does not consider that “anything close to a compelling justification has been offered” for the delegation of these powers and that they are therefore “inappropriate”.

The committee also raised concerns about clause 22, which gives the secretary of state powers to direct variations in the conditions of licenses for suppliers in Northern Ireland without seeking Parliamentary approval, otherwise known as ‘Henry VIII’ powers.

The peers say there is no reason why seeking Parliament’s approval would prevent any such changes coming into force immediately and therefore no “obvious” reason why the powers would facilitate greater speed.

A series of peers backed up the committee’s concerns during the debate.

Lord Lennie, Labour spokesman, accused business and energy secretary Jacob Rees-Mogg of carrying out a “power grab” which should be subject to “proper” parliamentary scrutiny.

Responding to the committee’s criticism, energy minister Lord Callanan defended the bill’s fast track procedures.

He said: “They are essential for ensuring that these crucial support schemes can be stood up at pace.

“The House will appreciate the speed at which this measure has been drafted. I pay tribute to the exemplary work of the officials involved in delivering it; it has involved lots of late nights and weekend working for them, for which I thank them.

“It is essential that these measures are delivered as intended. To be frank with noble Lords, these powers will allow us to do this with the appropriate scrutiny.”

During the same debate, Labour peer Lord Liddle said that other powers in the bill to vary the level of the revenue cap means that his party’s proposal for a windfall tax would be better for promoting “certainty” of investment.

He said: “A windfall tax, which is predictable because the suppliers of electricity know what bills they are going to have to pay, is better in terms of promoting long-term investment in renewables, which we desperately need, than this cost-plus arrangement, which is also variable, as I understand it, by ministerial order. That provides no certainty for potential investment.”