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The Independent Automotive Aftermarket Federation

Government introduces new Energy Prices Bill to ensure vital support gets to British consumers this winter

Date: Friday 14 October 2022

Consumers will pay a fairer price for their electricity as the UK government introduces new emergency powers that will ensure consumers across the country receive help with their energy bills this winter.

Without the launch of the schemes, businesses and consumers had been left facing increasing financial turmoil, with domestic energy bills estimated to increase to as high as £6,500 before the government stepped in. Recently announced support will see a typical household pay £2,500 a year for energy, while businesses will be paying less than half of predicted wholesale costs this winter.

The Energy Prices Bill, introduced in Parliament, provides the legislative footing needed to ensure that people and businesses across the UK receive support with their energy bills this winter through the Energy Price Guarantee for domestic consumers and Energy Bill Relief Scheme for businesses and non-domestic properties. This includes essential measures that enable the UK government to deliver comparable schemes in Northern Ireland and legislation that will require landlords and heat network operators to pass benefits through to tenants.

Low-carbon electricity generation from renewables and nuclear will be key to securing more low-cost homegrown energy and we are supporting continued investment in the sector, including through The Growth Plan.

Currently in the UK market, wholesale electricity prices are set by the most expensive form of generation – presently gas-fired generation, which are significantly higher in light of Russia’s invasion of Ukraine and Putin’s subsequent weaponisation of gas supplies. Low-carbon electricity generators are therefore benefiting from abnormally high prices, while consumers are having to pay significantly more for energy generated from renewables and nuclear, even though they often cost less to produce.

To further protect consumers, new powers to help sever the link between high global gas prices and the cost of low-carbon electricity have also been introduced through a new temporary Cost-Plus Revenue Limit in England and Wales. This will reduce the impact of unprecedented wholesale prices on consumers and the taxpayer by introducing a revenue limit, curbing the amount generators can make.

The precise mechanics of the temporary Cost-Plus Revenue Limit will be subject to a consultation to be launched shortly. The government has been working closely with industry on the detail of the proposal, ahead of it coming into force from the start of 2023. It will ensure consumers pay a fair price for low carbon energy and has the potential to save billions of pounds for British billpayers, while allowing generators to cover their costs, plus receive an appropriate revenue.

Energy Prices Bill
The Bill will introduce powers to enable the following:

Energy Bill Relief Scheme
The Energy Bill Relief Scheme will enable the government to provide financial assistance on energy bills for all eligible non-domestic customers, including businesses, charities and public sector organisations. This took effect on 1 October 2022.

Heat network support
Powers in the Bill will ensure that heat networks benefiting from the Energy Bill Relief Scheme pass through cost savings to their consumers. The Bill provides for the appointment of an Alternative Dispute Resolution body which will handle complaints raised by consumers against their heat network if it has not complied with passthrough requirements.

Pass-through requirements on intermediaries
This legislation is intended to ensure support from the Energy Price Guarantee, Energy Bill Support Scheme, or Energy Bill Relief Scheme, are received by the end user in cases where intermediaries procure energy on their behalf in accordance with the terms of regulation. For example, the legislation will require landlords to pass benefits to through tenants with further details of the requirements under this legislation to be set out shortly.

Cost-Plus Revenue Limit
The government is taking steps to break the link between abnormally high gas prices and how much revenue low-carbon electricity generators receive. This will allow consumers to pay a fair amount for their electricity and ensure electricity generators are not unduly profiting from the energy crisis caused in part by Russia’s invasion of Ukraine. The government recognises the importance of dispatchable and baseload generation for security of supply. The low-carbon technologies that can deliver these types of power do tend to have higher input costs (such as biomass and nuclear) and this is being considered as part of the detailed policy design.

Contracts for Difference
BEIS is also legislating for powers that would allow them to consider running a voluntary Contracts for Difference process for existing generators to take place in 2023. A voluntary contract would grant generators longer-term revenue certainty and safeguard consumers from further price rises.