The Truss government this afternoon tabled its promised new bill to write into law relief offered to homes and businesses from rocketing energy tariffs.
Energy secretary Jacob Rees-Mogg’s presentation of the draft law in the Energy Prices bill co-incided with confirmation that his boss the PM has U-turned again.
Liz Truss was reported by two sources to have reversed her veto on a £15 million campaign approved by D-BEIS and Rees-mogg to encourage consumers to economise on their use of expensive gas and electricity.
With its proposed new ‘Cost-Plus-Revenue Limit’ concept, Rees-Mogg’s Energy Prices bill also sets out the government’s intention to force owners of older wind or solar assets outside CfD (contract for difference) obligations to accept drastic tariff cuts, as the Truss administration seeks to de-couple soaring gas input costs from retail prices of at least some forms of electricity.
Ministers have set January as their deadline for energy suppliers to begin publishing cheaper tariffs for power made by non-gas generation assets.
Details of how the government will achieve the de-coupling of input costs from power generated free of gas are absent from today’s bill. Instead, they’ll be hammered out over three months of consultations with generators.
The talks will also decide if nuclear and biomass generation will also be included in the Cost-Plus-Revenue Limit.
Rees-Mogg said “Businesses and consumers across the UK should pay a fair price for energy.
“We have been working with low-carbon generators to find a solution that will ensure consumers are not paying significantly more for electricity generated from renewables and nuclear.
The energy secretary went on: “We have stepped in today with exceptional powers that will not only ensure vital support reaches households and businesses this winter but will transform the United Kingdom into a nation that offers secure, affordable and fairly-priced home-grown energy for all.”
Chancellor Kwasi Kwarteng echoed his fellow Etonian: “Our actions will mean that energy bills for the typical household will be half what they would have been this winter.
“We are protecting people, holding down inflation and preventing Putin’s energy price hike from causing long term harm to our economy by supporting businesses.”
Ministers intend their new arrangements to enable generators using early renewable assets to transition from the legacy Renewables Obligation subsidy to new CfDs. Clean generators have lobbied themselves for the measure, as mitigation against the gas crisis.
Reacting to the bill on behalf of low-carbon generators, RenewableUK’s CEO Dan McGrail commented:
“We are concerned that a price cap will send the wrong signal to investors in renewable energy in the UK. A price cap acting as a 100% windfall tax on renewables’ revenue above a certain level, while excess oil and gas profits are taxed at 25%, risks skewing investment towards the fossil fuels that have caused this energy crisis.
The clean generation representative pointed out that “this decade we need to attract £175bn of investment in secure, domestic wind power”.
“We can already see the investor turmoil that the EU’s proposed price cap is causing in the European market”, McGrail said.
“Industry will continue work with Government on policies to help cut consumer bills and safeguard investment. As such, to limit the negative impacts, it is essential that a cap is set at a level that doesn’t make the UK less attractive to investors than the EU, is technology neutral and has a clear sunset clause in place”.
Most wind generators sell their power a year or more in advance at prices that are a fraction of the record high market prices being set by gas, McGrail pointed out. Such hedging arrangements for wind power will help to keep electricity prices lower for consumers this winter, and the price cap must not undermine these arrangements, he urged.
“Industry has been proactive in proposing new fixed price contracts to cut costs and provide long-term, low-cost power for consumers”, said McGrail. “We welcome the inclusion of this proposal in the Bill, and it is vital that the scheme is developed rapidly so that industry can plan for new contracts and consumers can be confident that they are getting maximum benefit from cheap renewables.”
For practitioners in solar generation, trade body Solar Energy UK commented that the government’s proposed revenue cap on renewable power generation gave “another very poor signal” to investors.
Today’s laying before Parliament of the Energy Prices Bill comes two days after revelations that farming and environment secretary of state Ranil Jayawardena was seeking to effect reforms that – in the industry body’s view – “could virtually end the rollout of solar farms across England”.
Chris Hewett, chief executive of the lobbying body commented: “The UK solar industry is concerned that a windfall tax on revenue from existing renewable generators has been announced in haste, while many of the details are still to be worked out, particularly for small generators who have been excluded from ministerial discussions so far.
“This gives another very poor signal to international investors in renewables in the UK, on the back of speculation of restrictive planning rules for solar farms being pursued by Defra,” Hewett added.