Energy Bill [Lords]

Public Bill Committee, 13 June 2023.

James Gray (Conservative, North Wiltshire)

Order. We resume consideration of the Bill. I am speaking slowly in the hope that the shadow Minister may appear at the last moment—

Taiwo Owatemi (Labour, Coventry North West)

He was just behind me.

James Gray (Conservative, North Wiltshire)

Hopefully, then, he will be here very shortly.

We will resume our marathon consideration of the Energy Bill this morning with the Question that clause 171 stand part of the Bill. That, of course, is grouped with a number of other things: clauses 172 to 174, amendment 101, schedule 16, clauses 175 to 179, and new clause 39. To remind the Minister in case he slips again, the Question will be that clause 171 stand part of the Bill.

I welcome the shadow Minister to his place—all I have done so far is announce the first group. I call the Minister to speak to it.

Clause 171 - Relevant heat network

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Clauses 172 to 174 stand part.

Amendment 101, in schedule 16, page 335, line 37, at end insert—

“(aa) their interests in systems that deliver heat efficiently;”.

This amendment defines consumers’ interests expressly to include efficient heat delivery in order to ensure that regulation covers systems that are operational but are operating inefficiently to the detriment of customers.

That schedule 16 be the Sixteenth schedule to the Bill.

Clauses 175 to 179 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Thank you, Mr Gray. It is a pleasure to serve under your chairmanship yet again in this marathon but exciting and engrossing Committee.

Part 7 of the Bill relates to heat networks. The purpose of clause 171 is to define a heat network, clarifying the scope of heat networks regulation. As well as defining “relevant heat network”, the clause includes definitions for both communal and district heat networks.

A heat network provides heating, cooling or hot water to a building or collection of buildings, and its users. A communal heat network supplies heat to one building whereas a district heat network supplies two or more buildings. In both cases, the network must serve separate consumers or premises within the building or buildings to be considered a heat network. The clause provides a clear distinction between communal and district heat networks, which may require different legislative approaches. The definitions explicitly include networks that use heat pumps.

Clause 172 appoints the Gas and Electricity Markets Authority—Ofgem, for the avoidance of doubt—as the heat networks regulator for England, Scotland and Wales, and the Utility Regulator as the regulator for Northern Ireland. The Secretary of State—or, in Northern Ireland, the Department for the Economy—can, via regulations, change the regulator or change who carries out some of the regulator’s functions, assigning them to another body. For ease and clarity, whenever I refer to “the Department” in relation to heat network clauses, I am referring to the Department for the Economy in Northern Ireland.

Clause 172 also provides consequential regulation-making powers for the Secretary of State and the Department to amend this part of the Bill if the regulator is changed or some of its functions are reassigned. This is important to ensure that heat networks regulation remains agile.

Clause 173 provides the Department for the Economy in Northern Ireland power to amend the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 to provide for the regulator in Northern Ireland to be the competent authority for the purpose of those regulations. Amendments made under this power would enable the regulator in Northern Ireland to appoint a body as the alternative dispute resolution body in Northern Ireland.

The purpose of clause 174 is to allow the Secretary of State or the Department to regulate relevant heat networks and grant powers to those carrying out activities related to building or maintaining heat networks. Schedule 16 provides further details on the planned use of those powers. Under the clause, the Secretary of State or the Department will be required to consult on any changes before making any regulations under clause 171. Clause 174 also requires UK Ministers to consult Scottish Ministers when legislating in areas that are devolved to Scotland.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Will the Minister give way?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I rather expected that. I am happy to.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I thank the Minister; he almost invited the intervention. This is about consultation on matters that are fully devolved. We had a meeting, and the Minister expressed sympathy for our position on the need to find a way to strengthen the “consult” language so that it is not the Secretary of State imposing something. I wonder if he has any further information on that.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Member for his question. I received a letter from the Energy Minister in the Scottish Government, Neil Gray, just last week—I am formulating a response just now—on the very issue of consultation and consents. Discussions are ongoing as to the exact form that will take.

Clause 175 outlines the parliamentary procedures required for the regulations made under clause 174.

Clause 176 establishes that the Gas and Electricity Markets Authority—commonly referred to as GEMA—and the Northern Ireland Authority for Utility Regulation can recover the costs of regulating heat networks using gas and electricity licence fees. The Bill allows the recovery of costs for other bodies operating within the regulatory framework, such as the code manager and other bodies appointed to administer specific functions in regulation. The Government previously consulted on their proposed approach to cost recovery and received broad stakeholder support. The clause will facilitate the implementation of that approach and ensure that heat network regulation is sustainably and fairly funded.

Clause 177 provides power for the Secretary of State to designate, via regulations, GEMA as the licensing authority for the purposes of the Heat Networks (Scotland) Act 2021. The Scottish Government and other stakeholders have agreed to Ofgem being the regulator across all of Great Britain.

Clause 178 enables the Secretary of State to amend, via regulations, the Heat Networks (Scotland) Act 2021 to give the licensing authority compliance monitoring and enforcement powers under that Act. We intend to designate Ofgem as the licensing authority. That designation and the regulations will allow Ofgem to carry out this regulatory role in Scotland. Regulations under this clause must provide that offences created by the regulations are triable summarily only and punishable by a maximum of three months in prison or a fine not exceeding £200, or both.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I thank the Minister for giving way again. He mentioned the possible imprisonment of up to three months. That seems to cross over into the Scottish justice system, because the Scottish Government have effectively set a presumption against short sentences. This would clearly be a short prison sentence, so how would that work in reality, against the wishes of sentencing legislation in Scotland?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

The hon. Member makes a good point. As I said, the Scottish Government have agreed to Ofgem being the regulator across Great Britain. I will go away and find a detailed answer to his point, which is well made—indeed, it is important to my constituents—about how the crossover will work with the Scottish justice system. It is a completely devolved competency, which we, of course, respect.

Clause 179 provides definitions for the interpretation of this chapter’s clauses. The clause defines “the Department” as the Department for the Economy in Northern Ireland and “the NIAUR” as the Northern Ireland Authority for Utility Regulation.

Schedule 16 covers heat network regulation. Part 1 of the schedule provides definitions of the terms used in the schedule. Part 2 allows the Secretary of State to make regulations about the regulator’s objectives. The main objective of the regulator will be to protect the interests of current and future heat network consumers. Part 3 covers heat network authorisations. The authorisation regime will ensure consistent standards across the industry, raising consumer protections. To carry out regulated activities, persons will be required to comply with conditions of authorisation, and the regulator will have the powers to enforce compliance.

Part 4 covers code governance in relation to heat networks, and part 5 covers the installation and maintenance of licences. Holders of licences will have the additional powers required for installing and maintaining heat network equipment. The regulations may require the regulator to be satisfied that the person applying for the licence is suitable, as well as the criteria they must use when making this judgment.

Part 6 covers the enforcement of conditions in licences or authorisations. The regulator is able to issue orders and penalties when a person is likely to contravene or has contravened a condition. Orders can be used to require compliance with a condition. If breaking a condition has caused damage, loss or inconvenience for a consumer, the regulator can make a consumer redress order.

Part 7 covers the regulator’s powers of investigation. Although it is not considered appropriate to introduce a price cap on the cost of heat provided by heat networks now, the Government do intend to provide for the regulator to investigate whether the prices charged are disproportionate. That enables the regulator to take enforcement action against authorised persons charging disproportionate prices.

Part 8 covers step-in arrangements. The purpose of the arrangements is to facilitate the transfer of a regulated activity in relation to a heat network to a new entity, should the old entity no longer be able to carry on that activity. Part 9 covers the special administration regime. Similar to the provision for other essential services such as gas and electricity markets, this alters the normal administration process to allow for the continued supply of heat. It provides the ability to deploy a backstop should other actions to protect heat supply fail.

Part 10 allows regulations about the supply of heat to premises, including new connections and the metering of supply, and part 11 covers protections for consumers. Part 12 covers payments from the sector to support the special administration regime. It allows for regulations that will authorise the regulator to charge heat networks, via their authorisation conditions, to fund the regime. In that way, the regime spreads the cost of a firm failing across all companies. This is a fair and proportionate way of funding the regime.

Finally, part 13 covers a range of topics, including consultation and co-operation, the objectives of the Secretary of State and Departments across the UK in carrying out their functions, and the creation of offences. I hope Members agree that heat networks play an important role in decarbonising heat and supporting the delivery of our net zero commitments.

James Gray (Conservative, North Wiltshire)

There is no interest from elsewhere. The Question therefore is—[Interruption.] If the shadow Minister wishes to take part in the debate, he needs to let me know; otherwise, we will move on.

Alan Whitehead (Labour, Southampton, Test)

I did raise my hand, but it was my left hand rather than my right hand.

James Gray (Conservative, North Wiltshire)

You might stand up—that might be helpful in future—or tell me, or something.

Alan Whitehead (Labour, Southampton, Test)

I should start by apologising to you, Mr Gray, for being marginally late. Those who know me will know that although I am usually rather close to the line in getting to my seat, I am rarely not actually there in time. I apologise for that slight problem this morning; I blame the lifts in Parliament.

The regulation of the whole system of heat networks, and combined heat and power for district heating schemes, is an important part of the Bill, which is long overdue in its arrival. Members will be increasingly familiar with district heating schemes in their constituencies, which provide heat, power and sometimes cooling both to properties and to industrial and commercial premises within a network scheme.

District heating schemes are by no means new. A number of them have been operating for many years, such as the system in Pimlico—the system in Westminster has been going for many years. Partly because such schemes have been going for many years, they have fallen out of the spotlight in terms of regulation and bringing their provisions into line with what customers expect from elsewhere in the energy system, particularly in relation to customer-facing retail and so on.

Because district heating schemes are enclosed, they are essentially monopoly providers of heat within their own area. They are generally advantageous to customers because they provide reliable heat, usually at a considerably lower price than the general market. The Government are seeking to promote the idea of local authorities extending heat networks for precisely those reasons. They are potentially very low carbon, and agnostic in terms of heat sources for the network. The key is that the network goes around a particular area, providing heat directly to people’s homes, and, as I said, to offices and industrial premises.

In many ways the schemes just do not fit: they stand aside from what customers are normally expected to pay attention to these days, and the energy, gas, heat and power that they receive. As I said, that is because the heat networks in this country, and indeed the combined heat and power systems relating to heat networks, quite often provide electricity as a by-product of the heat-engine process. But they predominantly provide heat for customers.

A number of problems relate to the customer arrangements, and customer expectations, regarding that closed system. Because each of the individual extant networks in the country is effectively a mini-business in its own right, they have at their heart an arrangement whereby a company, not-for-profit or local authority, in some instances, that runs a scheme is responsible for procuring the fuel as if it were a retail energy company for the network, and then supplying it to customers through the heat engine and the network that goes into people’s homes.

The issue for customers is quite often, first, whether the company that is providing supplies for the heat network has procured them in a reasonable and cost-efficient manner. Secondly, is the system that is delivering the heat for customers efficient in its own right? Particularly in older schemes, there are a number of circumstances in which the system provides heat to customers, but not efficiently. The pipework may be old, furred up and not functioning well. Of course, it is extremely difficult for the customer to recognise whether the system is efficient. Sometimes its inefficiency comes to light only when people start being charged unreasonably large bills. The company that is providing the service will then go through its reasoning about the supplies coming in and the service being provided, but not the efficiency of the service.

There is little customer redress in the systems because they generally are not regulated. They have voluntary regulation, run by the Association for Decentralised Energy, whereby heat networks sign up to a redress programme, but currently it covers only a minority of the total heat networks in operation. Bearing all those things in mind, as well as the system’s likely future, the system is long overdue being regulated in a way that delivers for customers the certainty of a good service, redress where the service is not so good, and access to an understanding of how the system as a whole works, and what the companies that provide the service are doing—hopefully in the interests of customers, but in some circumstances not.

The system as a whole works pretty well: most of the companies that run heat networks are honourable organisations, often set up on a not-for-profit basis to provide a district heating scheme. The issue is at the margins of those schemes that do not run their service particularly well, or that do not provide decent redress for their customers and have a monopoly situation as far as their supply is concerned.

The remedy of switching is not available as far as heat networks are concerned; someone is either in the heat network or not. People cannot opt to switch to a parallel provider, so other forms of redress and action are required to protect customer interest in relation to heat networks. The customer needs a voice on the activities of the heat network, and we need to ensure that the network works in the customer’s interest, rather than just in the narrow interest of the heat network supplier.

The regulations are way overdue. I have been campaigning actively for a long while to get heat networks regulated. Hon. Members with heat networks in their areas will know of problems arising from the recent energy price crisis, whereby the price of heat from heat networks has increased far more than that of heat from other sources. The particular reason for that is that heat networks are not subject to the price cap and various other regulations relating to mainstream prices. Energy prices have gone through the roof in some areas, but there are no constraints on the companies, and hon. Members, who have brought these issues to the House on a number of occasions, have been left frustrated because very little can be done.

If price caps were applied to heat networks in the same way as they are to large retail companies providing gas or other forms of heat through customer accounts, a succession of companies may well go bust. As hon. Members will remember, when prices went up very high and some companies had not hedged their supplies properly, 29 small, medium and fairly large energy retailers went out of business over a couple of years. Given that heat network operators are essentially small versions of retail companies, that situation may well be repeated. We need something in regulation that applies to the issues, problems and circumstances of the companies providing those services so that they stay in business and provide a good service, and the customer has a good level of redress. The measures we are debating pretty much provide for that, so I substantially welcome the fact that, at long last, we will have on the statute book a pretty comprehensive system of heat network regulation.

Our amendments would not substantially amend or overthrow the regulatory system; rather, they draw attention to one or two things I have mentioned this morning that I am not sure are thoroughly in the system as it stands. Amendment 101, on general regulation, seeks to amend schedule 16, which sets out the detail of the regulation of the network. It would add to the schedule the customer’s interest in systems that deliver heat efficiently. That is the case with most newer systems, but for older systems, set up before regulation, the heat was often not delivered efficiently and nothing was done about it. It is important to set out in the schedule that the regulator’s duty is to regulate not just the system but its efficiency, to ensure that people do not accumulate a lot of expense over a long time because the system is not operating in their interest.

New clause 39 would explicitly state guarantees of consumer protection, which should be—and, I grant, substantially are—within the regulatory framework. It would ensure that Ofgem sets out

“a new licence to operate for heat networks that guarantees equivalent protections for heat network customers…when compared with electricity and gas customers.”

Those protections include, but are not limited to, a price cap of some description for heat network customers. That cannot be the same as the price cap that we will discuss later, which the Government have rather inconveniently removed from the Bill but I hope will restore. That price cap has to be tailored to the circumstances of heat networks. The proposed protections also include a licence condition to treat customers fairly. That is particularly important, as exit is not an option for heat network customers. This is a question of fair treatment, as opposed one of simply switching to another supplier. The final protection proposed by the new clause is a licence condition addressing ability to pay. Again, that needs to be tailored to the particular circumstances of heat network customers, but the arrangements should not be that far off those that already apply to general electricity and gas suppliers.

We have had considerable debates in this House—the Minister and I have taken part in some of them—on so-called pass-through arrangements for heat networks, whereby Government assistance for energy customers did not land with heat network customers because there was an intermediate between the Government and the customers at the end of the process. The Government have certainly found it very difficult to get in place arrangements for additional payments to be made to customers affected by sky-high energy prices. The process has been revisited repeatedly so as to, first, ensure that the heat network agents are passing on the assistance they receive, and secondly, consider the remedy for customers who are not getting what they should be getting.

All of those problems result, at least in part, from the fact that there is no regulatory scheme for heat networks, which means that the circumstances of their customers are not analogous to those in the wider energy sphere. New clause 39 would be a useful addition. It would clarify what Ofgem must do when setting up licences to operate heat networks, and it would provide guidance as to the circumstances under which those licences should be granted.

We very much support the Bill’s content on heat networks, but the minor tweaks suggested by our proposed amendment to schedule 16 and our new clause 39 are in the interests of customers and would help not hinder them when it comes to the end result. After all, I think that that is what everybody on the Committee wants for heat network customers not just now but in the future.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

It is a pleasure to serve under your chairmanship, Mr Gray. Like the shadow Minister, I broadly welcome these clauses and the principles behind them. I made a couple of interventions on the Minister. I cannot quite remember, but I have a feeling that clause 174 is not one of those referenced in the letter from Neil Gray, the Energy Minister in Scotland. I will go back and check that. The Scottish Government have concentrated on some of the key clauses, but I will check and reserve the right to come back on this issue on Report if need be. I appreciate that the Scottish Government are working with the Minister. I also appreciate the Minister saying he will come back on my query on clause 178.

As the shadow Minister said, heat networks have been debated in this place for a few years. I have found a couple of speeches of mine from two years ago, when matters were raised in Westminster Hall—primarily by Tory MPs—so this is welcome. If the Committee wants, I can give the thrust of my two speeches from back then, because it is still relevant, or I can just condense them if the Committee prefers. I will take the Chair’s guidance on that.

James Gray (Conservative, North Wiltshire)

Condensing is always a good thing.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Why do we need this? This is why I also support new clause 39. As far back as 2017, the then director of the Department for Business, Energy and Industrial Strategy director stated that

“whatever you do you end up with 17- 24 per cent district heating”.

That means that some 6 million homes will have district heating, so it is important that we actually facilitate that to allow the transition to net zero. It is even more important that we provide protection for those 6 million homes, or people will not accept the principle of district heating and we will not get to net zero. At the moment, around half a million homes have some form of either district heating or communal hot water.

The numbers we are talking about mean that I agree with new clause 39 that a price cap is needed. It would give surety and protection to customers, and help avoid bad news stories as well. Even when I spoke two years ago, consumers and landlords were reporting price rises of up to 700%, according to a Heat Trust report. That illustrates the need for a cap and protection, so that people cannot just continue to ramp up costs.

Amendment 101 is a simple amendment, and I hope the Government will consider accepting it. It is almost administrative, but it does have qualities. I have in the past reported the fact that communal heat networks sometimes operate inefficiently because they are not subject to technical standards. Some contractors choose to complete heat system installations that come at the lowest form of capital cost, rather than the more efficient, longer-term operational systems that give whole-life savings. I wonder if amendment 101 would protect against that. Could the Minister advise us on how the new regulations will ensure that it is the most efficient systems that will be installed, to the benefit of customers and consumers?

Previously, the Government’s green energy support programme had to address the fact that some people in district networks were classified as commercial customers. That was because, as the shadow Minister has said, it is in effect small independent companies that operate these networks. We need to ensure that those classified as commercial customers are protected as much as domestic customers. I should have intervened on the shadow Minister, but I hope that new clause 39 would provide that protection. We welcome the provision, but in order to convert people to district heat networks, we really need wider, joined-up Government policy.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I welcome the broad welcome given by His Majesty’s official Opposition and the Scottish National party to the clauses. I tend to agree with the hon. Members for Southampton, Test and for Kilmarnock and Loudoun. These measures are long overdue, so I thank them again for their positive responses.

I will turn to the points made by the hon. Member for Kilmarnock and Loudoun regarding consent and consult. Notwithstanding my commitment to get an answer for him regarding the criminal justice system in Scotland and how it will interact with these new regulations and their administration in Scotland, I confirm that in the recent letter from the Energy Minister, Mr Gray, the Scottish Government have in fact dropped consent requests on heat networks, so they are very happy to proceed as drafted here. I wanted to give confirmation of that. I will turn to the hon. Gentleman’s other points later.

I thank the hon. Member for Southampton, Test for his amendments, which provide an opportunity to discuss in detail what we are doing here today and why we are not going as far as he suggests we should.

I turn to amendment 101. If not designed and built to high standards, heat networks can experience inefficiencies such as heat losses from the pipes that deliver hot water from the energy centre to homes and businesses. That can lead to consumers paying higher prices and experiencing unreliability of heat supply, as the hon. Member for Southampton, Test said. I reassure him and others that we already have a robust plan to address that issue. The Bill provides for the introduction of technical standards on the design and build of heat networks, which we committed to implementing as part of a regulatory framework in our 2020 heat networks regulation consultation. That will require all new heat networks to be designed and built to minimum standards, and existing networks to make efficiency and performance improvements over time.

As a regulator, Ofgem will enforce the requirement. Heat networks will be required to submit documentation to Ofgem demonstrating that their compliance with technical standards has been certified. As I have set out, the Bill and subsequent secondary legislation will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be disproportionate compared with systems and similar characteristics, or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative heating system. Ofgem will also enforce minimum standards on the reliability and quality of the heat supply. I hope that reassures hon. Members, including the hon. Member for Southampton, Test, that the Government are already taking steps to improve efficiency on heat networks and—to address some points made by the hon. Member for Kilmarnock and Loudoun—to protect consumers from high prices and unreliability.

I turn to new clause 39, which was tabled by the hon. Member for Southampton, Test. Ensuring heat network consumers are protected from high prices and unreliability is our principal reason for introducing heat networks regulation, so I am pleased to see hon. Members recognising the importance of addressing the issue. I appreciate that they will want to see the sector regulated as soon as possible, which is one of the reasons we are progressing the Bill at this pace. However, it would not be possible nor sensible to ask Ofgem to require a licence regime within three months of the Bill receiving Royal Assent. Secondary legislation authorisation conditions are needed to enable Ofgem to operationalise as a regulator. We will conduct public consultations with industry and consumer groups on secondary legislation and authorisation conditions before they come into force. We expect heat networks regulation to come into force shortly after that.

I recognise that hon. Members want to ensure that heat network consumers do not pay disproportionate prices. However, we do not believe that a price cap is suitable for the sector, given its nascent and incredibly diverse state across the country. A price cap also risks heat network insolvencies prior to step-in arrangements being embedded into the regulatory framework. The Bill provides the Secretary of State with powers to introduce a price cap in future, should one become appropriate once the market has matured. I reassure hon. Members that we are taking steps to tackle high prices across the board.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Can the Minister give us more information on the mechanisms in the Bill that allow the Government to bring forward a cap in future?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

As has been set out in the Bill and explained this morning, the powers will be given to the Secretary of State, determined at a point in future when the sector matures, which is exactly the process by which he can introduce a price cap. I think we have gone through that this morning.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Will the Minister write to me to give a little more detail on that?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Yes, I am happy to write to the hon. Gentleman and provide more detail on exactly that point.

The Bill and subsequent secondary legislation will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be disproportionate compared with systems with similar characteristics. It will also be able to investigate and intervene if prices are significantly higher than those consumers would expect to pay if they were served by an alternative heating system. We are taking action to address current high prices in the heat network sector. The energy bills discount scheme, which runs from 1 April 2023 to 31 March 2024, provides support to heat networks with domestic end consumers.

On conditions around treating customers fairly and ability-to-pay assessments, I am pleased to inform hon. Members that the Government already plan to consult on introducing comparable levels of service and protection to consumers in other regulated utilities as part of a public consultation on heat network consumer protection rules. We will publish that consultation in due course. I hope that reassures hon. Members that the Government are already taking steps to deliver regulation and tackle high prices in this sector. I therefore ask the hon. Member for Southampton, Test not to move his amendment 101.

James Gray (Conservative, North Wiltshire)

We now come to the Question on clauses 172 to 174 stand part—we have just debated them. With the leave of the Committee, I will take them together.

Alan Whitehead (Labour, Southampton, Test)

Do you want to know whether I am going to withdraw amendment 101, Mr Gray?

James Gray (Conservative, North Wiltshire)

No. The hon. Gentleman should not interrupt me while I am putting the Question. In answer to him, however, his amendment 101 comes after the decision on clauses 172 to 174. I thank him for his intervention, but he is wrong.

James Gray (Conservative, North Wiltshire)

The Question now is whether the Opposition wish to move amendment 101.

Alan Whitehead (Labour, Southampton, Test)

I will include an indication of our position on new clause 39, Mr Gray, although I understand that any vote on the new clauses will take place at the end of our proceedings and not today. That is right, is it not? I will also say something on amendment 101.

James Gray (Conservative, North Wiltshire)

The hon. Gentleman has already spoken to amendment 101 as part of the group that we have just debated.

Alan Whitehead (Labour, Southampton, Test)

Yes. I am seeking to state why I might wish to withdraw amendment 101, or otherwise, and in so doing I was seeking clarification, Mr Gray. My understanding is that new clause 39, which is included in the group, will not be up for a vote now, because that would come at the end of our proceedings.

James Gray (Conservative, North Wiltshire)

That is correct. New clauses come at the end of proceedings. If the hon. Gentleman wishes to move amendment 101, he may do so now. Immediately after that, we will come to the Question on schedule 16 —that is the next thing to happen. The Question on new clause 39 comes at the end of our proceedings, so is for a decision later. Right now, the only question is whether he wishes to move amendment 101.

Alan Whitehead (Labour, Southampton, Test)

Yes. I was actually trying to save time, Mr Gray.

James Gray (Conservative, North Wiltshire)

Leave that to me.

Alan Whitehead (Labour, Southampton, Test)

Right.

On amendment 101, I do not think that there is anything explicit in schedule 16 relating to the position of efficiency in regulation. Having had a look at the schedule again, I am confirmed in that view. I take what the Minister said about the intention to ensure that that is part of regulation, but I am afraid we are a little in the hands of what the Minister may decide about the regulations as far as efficiency goes. The Minister is an honourable one, so I am sure that he will seek to carry out what he has said today to the letter. I am therefore happy not to move amendment 101, but I note that that was one of the purposes of regulation should have been made rather more explicit in the schedule.

James Gray (Conservative, North Wiltshire)

The amendment is therefore not moved.

Clause 180 - Regulations about heat network zones

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Chapter 2 of part 7 covers heat network zoning in England. Heat network zoning is a key policy to deliver the scale of expansion of heat networks required to meet net zero. The process brings together local stakeholders and industry to identify and designate areas within which heat networks are expected to be the lowest-cost solution for decarbonising heating.

The clause provides a definition of heat network zones, gives the Secretary of State the general power to make regulations about heat network zones, and outlines the parliamentary procedures that must be followed when doing so.

Regulations made in relation to any of the following three matters will be subject to the negative procedure: first, any requirements on zone co-ordinators to consult on zone designations, revocations, or reviews; secondly, reviews of the designation of areas as heat network zones by zoning co-ordinators or the heat network zones authority; thirdly, any requirements for zone co-ordinators and the authority to consult on the zoning methodology, and reviews of the heat network zoning methodology by the Secretary of State. All other regulations will be subject to the affirmative procedure.

Alan Whitehead (Labour, Southampton, Test)

I do not have much to say other than that we now move on to heat network zones as opposed to heat networks themselves, and we will be debating what the term means and how the zones work. Clause 180 sets the stage, and as we will be debating amendments on a future clause, I have nothing further to say about this one.

Clause 181 - Heat Network Zones Authority

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment 102, in clause 181, page 152, line 27, after “the Secretary of State” insert

“or the Gas and Electricity Markets Authority”.

This amendment is to ensure that the Gas and Electricity Markets Authority may be designated as the regulator for heat network zones.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Amendment 115, in clause 181, page 152, line 30, at end insert—

“(5) The Heat Network Zones Authority shall be responsible to and regulated by the regulator.”

This amendment makes the regulator responsible for Heat Network Zones.

Clauses 181 and 182 stand part.

Alan Whitehead (Labour, Southampton, Test)

We have tabled two amendments to clause 181. As far as I understand it, the clause adds to the heat network system, which, as I have said, has evolved over the years into a number of heat networks in various parts of the country.

A good idea for future heat network development would be to have a much more systematic approach and an understanding of where our heat networks may be most appropriately sited and the best conditions for them to be established. We know a number of potential good and bad conditions for heat networks. For example, a certain density of population, buildings and so on is needed for heat networks to be efficient, although there are in existence small heat networks that serve very small communities. Indeed, heat networks can range from being marginally larger than a few properties to covering large parts of cities.

There are five major heat networks in my city of Southampton, one of which serves the whole city centre and surrounding areas, and has an 18 km heat delivery pipe network. It is connected to a geothermal scheme in the city centre, so it efficiently provides heat to that whole area. It is connected not just to domestic properties but to a number of commercial users, which I think includes the nation’s only geothermally heated supermarket, civic centre, health authority centre, and so on.

One component of a decent heat network is what is in the network to validate the load that is supplied. A heat network may be just for domestic properties, as is the case in some housing developments in Southampton, but that is not the most efficient way of developing a heat network because the load from domestic properties changes seasonally. If a heat network is connected both to a number of properties—an estate or whatever—but also has industrial or commercial users, the load can be spread out and equalised over the years.

The Southampton schemes operate quite efficiently within the right places for zones. Nevertheless, it is—or should be—a function of local circumstances that heat networks are more likely to be applied in constituencies where there is a considerable gathering of industrial and commercial activities and population zones, and are less applicable in large rural constituencies, although there are some heat networks in small towns and villages. Within that zone understanding, there may be arrangements that pertain to local circumstances: for example, zones may be organised in such a way that ensures the likelihood of success for the heat network is relatively high.

I understand that this section of the Bill seeks to ensure that local authorities are required to look at research, to consider where it would be good to have a heat network and to produce a heat network zone plan, so that as we develop heat networks for the future we have a much better picture of where the schemes would work well, where investment may best go and the extent to which success is likely to be high, rather than someone perhaps taking a flyer on something that probably will not work well for the future.

We are happy with the idea of heat network zones being put into the Bill, that we approach them in the way that I have described and that they complement the regulation of the system in as much as the whole system now is much more in the mainstream of energy planning and energy futures as a whole. I hope that our amendments are complementary to the general scheme of things. They simply try to align the regulation of the heat zone development process with that of heat zones themselves, proposing that the process of heat zone discovery and development should be regulated by the same regulator that regulates heat as a whole: the Gas and Electricity Markets Authority.

It is important that there should be a regulator for this particular activity so that it does not stand alone from everything else happening as far as heat networks are concerned. I do not think that would impede the development of heat networks—on the contrary, it would assist them by making sure that the way we were bringing forward heat zone arrangements was generally of assistance to heat networks as a whole.

What if a local authority or similar body involved with developing heat network zones were not interested in heat networks? It might locally regulate heat zones in a way that did not take seriously the whole question of heat network development. The regulation of heat zone arrangements under the circumstances that I am discussing would ensure that there was a pretty uniform approach as far as heat network development was concerned. Those engaged in it would know that someone was looking over their shoulder to make sure that they were doing the job properly. That is all we want to add to the measure and I think the Minister will agree that it is a pretty positive addition. It certainly does not detract in any way from the validity of the heat network process and the idea that there are right and wrong places for heat networks. We must get them in the right places so that they can succeed for customers as well as they possibly can.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Member for his amendments, all of which are designed to ensure that the regulatory frameworks for heat networks and the building-up of capacity in this country for heat network zoning gets to a place that will support the growth of the industry in the future. I resist the amendments only because I feel that the powers in the Bill meet the required level of engagement and regulation necessary at this stage for what is currently a nascent but will in time become an incredibly important part of the wider energy mix.

I turn first to amendment 102, which relates to designating GEMA as the heat network zones authority. The zones authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.

As for who could fulfil the zones authority role, clause 181(3) is explicit that

“The Secretary of State may, but need not, be designated”

as the zones authority. Therefore, the clause, as drafted, already provides that regulations may appoint GEMA as the zones authority.

The zones authority will fulfil a different function from the heat network regulator, which we propose, as set out in clause 172, should be fulfilled by GEMA for Great Britain. That role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England.

We will specify the zones authority’s functions and responsibilities within the regulations when they are brought forward. That will be subject to further consultation in due course as we continue to develop our policy proposals, and we look forward to engaging with Parliament on that. Appointing the zones authority in regulations will allow for amendment, should that be required, as and when its functions change over time and as heat networks become more established throughout the United Kingdom. I hope that has helped to clarify our proposed approach and the scope of the powers already provided for in the Bill.

I turn to amendment 115, regarding the relationship between the Heat Network Zones Authority and the heat network regulator. As I have said, we intend for GEMA to fulfil the heat network regulator role in Great Britain. The zones authority will be a national body responsible for certain zoning functions. We will consult on who should fulfil the zones authority role in due course, but we do not consider that the zones authority should itself be subject to oversight by the heat network regulator. I hope this has helped to clarify our proposed approach regarding the zones authority and how its role relates to the heat network regulator, and I therefore ask the hon. Member for Southampton, Test to find it within himself to withdraw his amendment.

Clause 181 gives the Secretary of State the power to make regulations that appoint a body as the Heat Network Zones Authority, which is known as “the Authority”. It allows the authority to delegate any of its functions to other persons specified in the regulations. In practice, that may allow for certain entities, such as local authorities, to collect information on behalf of the authority in zones. As set out in the clause, the Secretary of State may be designated as the authority. We intend to consult further on roles and responsibilities within heat network zones in due course.

Clause 182 gives the Secretary of State powers to make regulations about zone co-ordinators. Zone co-ordinators will support the delivery of heat networks in heat network zones and will have ongoing responsibilities to ensure that the operation of local heat networks complies with the zoning legislation. Zone co-ordinators will also enforce zone requirements where necessary and collaborate with the national zones authority and national heat networks regulator when required.

The clause describes what regulations the Secretary of State can make about the zoning co-ordinator. It also enables the zones authority to intervene, for example, in cases where there is a risk that a substantial heat network zone may not be realised. Those powers may be necessary in cases where a local authority fails to act or is unable to act. In those instances, the zones authority may carry out any function of a zone co-ordinator, may direct a zone co-ordinator to carry out its functions and/or may require a local authority to establish a zone co-ordinator.

Alan Whitehead (Labour, Southampton, Test)

Once again, the bona fides of the Minister are not in any question at all, but what he is saying to us relies quite a lot on the regulations that will follow from the Bill and how the Secretary of State may designate under clause 181 a person to act as the Heat Network Zones Authority. If the Secretary of State decides that there should be a Heat Network Zones Authority, we are not sure exactly how that will come about. It may be that we do not have an authority as such, but the Department effectively operates as the authority, or a complete Heat Network Zones Authority could be set up with offices and civil servants or quasi-civil servants, although that might be a bit bureaucratically overbearing.

Again, the Bill does not specify how that authority, whatever it is, will be tucked into the system as a whole. The Minister says, “I’m sure it will be, because we are sensible people and we will make sure we do it,” but that has not been put on the face of the Bill, which is always good practice. Whatever our intentions may be today in this Committee—and they are good intentions—a piece of legislation has to stand in circumstances where those intentions may not be so good under a future Government. That is why we tabled our amendment, but I hear what the Minister has said, and that is on the record. Given my boundless trust in the Minister’s good intentions for the future, I hope that he will do what he has said regarding heat network zones authorities, and their regulation and operation. On that basis, I beg to ask leave to withdraw the amendment.

Clause 183

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss clauses 184 and 185 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 183 gives the Secretary of State the power to make regulations to establish the process for creating heat network zones, which we have just discussed. In the legislation that is referred to as identifying and designating a zone. The clause also gives the Secretary of State the power to make regulations to establish the process for the review of zone designations. A review of zones could lead to changes in the boundary—for example, making the zone larger or combining two existing zones.

Subsection (2) provides that the regulations must require the identification of zones to be done in accordance with the zoning methodology, which is established under clause 184. Subsection (3) outlines further matters that the regulations may specify in relation to the designation of areas as zones. Subsection (4) outlines what may be specified in regulations regarding changing or revoking zone designations. Subsection (5) outlines regulations that can be made about the review of zone designations.

Clause 184 gives the Secretary of State the power to establish a methodology for identifying heat network zones. The methodology will standardise the identification of zones nationally. Proposals for the use of, and approach to, that national methodology received widespread support from stakeholders during the Government consultation.

Clause 185 allows the Secretary of State to make regulations about the ability of the zones authority and zone co-ordinators to request the information required to support the national methodology for the identification, designation and review of heat network zones. The clause, and the regulations that follow, will facilitate the zones authority and zone co-ordinators in requesting and receiving the necessary information to ensure that heat network zones are situated in the right locations. As I discussed in the context of zone reviews under clause 183, the location of heat network zones can be changed as necessary to reflect the impact of changing technologies and neighbourhoods over time.

Alan Whitehead (Labour, Southampton, Test)

The Minister reflects that circumstances may change over time so it is necessary to have such a power. He is right that circumstances are not static; indeed, we may well miss a lot of good opportunities if we place too much emphasis on the static nature of what we have designated for the future. I think that we will debate, in a future clause, circumstances concerning the development of heat networks within zones, but on the changes that may be necessary in order to keep heat network zones up to date, this is a sensible provision that we support.

Clause 186 - Heat networks within zones

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss that clause 187 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 186 allows the Secretary of State to make regulations about heat networks within heat network zones. That includes specifying which buildings may be required to connect to a district heat network within a designated zone. Subsections (2)(a) and (2)(b) allow regulations that specify the types of buildings within zones that will be required to connect to heat networks, when they must connect, and how they are notified of that requirement.

Subsection (2)(c) allows the regulations to specify when and how the zone co-ordinator can grant exemptions from the requirement to connect to the heat network. Subsections (2)(e) to (2)(h) allow regulations to make provision about requiring heat sources in zones to connect to a heat network. Subsections (2)(i) and (2)(j) allow regulations that provide for the zoning co-ordinator to set local limits on emissions from heat networks and any grace period to comply with that limit.

Subsection (5) allows regulations to specify when the zoning co-ordinator may or must ask a heat source to connect to a heat network, the types of heat source that can cover, and how the heat source owner can appeal against the requirement to connect. Subsection (6) allows regulations to specify how local limits on emissions from heat networks in zones are set. Subsection (7) provides details about what regulations can be made about grace periods for local emissions limits.

Clause 187 allows the Secretary of State to make regulations about the delivery of district heat networks within heat network zones. Those regulations will give structure to the zoning co-ordinator’s role and responsibilities. “Delivery” refers to the design, construction, operation and maintenance of heat networks. His Majesty’s Government recognise that there are several feasible models for delivering heat networks in zones depending on local circumstances, including the level of involvement of the zone co-ordinator. The clause, and the regulations that flow from it, aim to provide a flexible approach to zone delivery.

The engagement we have had with the heat network industry and with local government has highlighted a desire for flexibility in how heat networks are delivered within zones, as there are a range of ownership and delivery models that could be employed in the future. The Government’s expectation is that the regulations will define what decisions zoning co-ordinators and other bodies can take regarding zone delivery, with guidance from the zones authority to help inform their decisions. The clause provides that regulations may determine when zone co-ordinators may decide what heat networks are delivered in their zones, and by whom, including circumstances in which the zoning co-ordinator may deliver heat networks themselves.

The Government recognise that there is a risk that leaving decisions about zone development solely in the hands of zone co-ordinators could risk a heat network zone not being developed. Therefore, subsection 5(g) allows regulations to define the circumstances in which zone co-ordinators may lose the ability to make decisions about heat network delivery in zones. The intent is that that will happen if the zone co-ordinator has not taken certain steps to develop the zone following a set period after the zone designation.

Alan Whitehead (Labour, Southampton, Test)

Clause 186 rather reminds me of Bertrand Russell’s definitions of propositions that are automatically members of their own class and propositions that are not automatically members of their own class, but I do not think we will debate that to any great extent this morning.

James Gray (Conservative, North Wiltshire)

No. We will avoid that at all costs.

Alan Whitehead (Labour, Southampton, Test)

It is an interesting debate in its own right.

James Gray (Conservative, North Wiltshire)

Perhaps for some other time.

Alan Whitehead (Labour, Southampton, Test)

For no other time, probably. Clause 186 is a relevant and necessary proposition concerning the development of heat zones and heat zone authorities, but one thing that does rather concern me is that although it is important that heat networks are able to develop in the most appropriate way and under the most appropriate circumstances, it is also important that the connections between heat networks can develop in the most appropriate way within a particular area.

I mention that point because there are circumstances in which heat networks may develop independently in parts of cities. The geographical and other siting considerations could lead to the development of interconnections between heat networks so that their joint efficacy is improved. If an extensive heat network, such as the one in Southampton, has a number of independent networks relatively nearby that have developed under different circumstances but are providing the same thing, there is considerable advantage in ensuring that they are interconnected so that they can share heat production and, if necessary, heat network inputs.

As I am sure the Minister is aware, heat networks are agnostic as to the fuel that goes into them. It could be from a heat engine, a geothermal source or a low-carbon source—hopefully, we will develop those to a much greater extent—such as multiple ground source heat pumps or hydrogen engines, which are already in existence and can replace gas engines in heat networks.

The development of individual heat networks with different forms of fuel may well mean that the fuel can be boosted considerably through association with other heat networks. In Southampton we have one geothermally heated network, which is boosted by a gas engine, and another system, around the general hospital, that is run by a gas engine. The hospital trust is thinking about what to do about that, given that a gas engine is not the best low-carbon solution, although the system is very efficient. At the moment, the scheme just heats the hospital, but if it were developed effectively it could also heat the surrounding residential properties and industries. That would considerably benefit the hospital trust’s income over time. The trust is thinking about joining the city authority in looking for a geothermal solution to its district heating arrangement when it replaces the gas engine. If it does that, how far it puts its geothermal well from the well that has already been drilled for geothermal purposes could be an important element in ensuring the two schemes work as efficiently as possible in relation to the aquifer under the city, which informs the current geothermal scheme.

We should allow connections and co-ordination among district heating schemes to ensure that they are working as well as possible. Booster engines around circuits could make the networks more efficient over time. They may be supplied by another scheme at the end of the network, if the operators of the first scheme are worried about the scheme’s reach if it changes its fuel source. The development of schemes should also be co-ordinated in the way I have described: it may be that the net efficiency output of two or three schemes will be less than optimal unless they are connected in some way, at least in relation to the fuel source and network development.

It does not seem to me that these clauses fully provide for that eventuality. Is there a responsibility or duty for the zone authority to optimise the processes of heat networks within heat network zones, or is it something that may or may not happen, depending on the good will of the various schemes in various areas? Indeed, does it depend on how alert or otherwise the local authority is in seeking to do what is good for all schemes in its area, rather than individual schemes doing their own thing in particular places within the zone?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Member for his questions. He made mention, almost in passing, of heat network zones doing their own thing within zones. It is important to point out that in clause 186 there are several protections against heat network zones doing their own thing. Zones will inherently represent areas where heat networks are expected to provide the lowest-cost low-carbon heating solution. Customers will be able to apply for exemptions from the requirement to connect where it would be inappropriate. Ofgem’s consumer protection framework will provide protection for domestic consumers and microbusinesses, and we will consider consulting on whether protections should be extended to other consumer groups, such as larger non-domestic consumers, which are in scope of the requirement to connect to a heat network. I know that the hon. Member’s points were not specifically directed at that issue, but he mentioned zones being able to do their own thing, and it is important to ensure that consumer and business protections are built into the regulations.

We talked about hospitals, albeit in passing. We are not setting out specifically which buildings will be required to connect to a network, but we can require certain buildings in zones to connect to a heat network. Doing so encourages investment in the heat networks and accelerates the deployment of low-cost, low-carbon heat. The categories of buildings chosen to connect will strike a balance between this investment certainty and individual consumer choice. That will develop as the heat network market in England grows. We may need to refine these categories. This is a nascent industry in the early stages of its development, so describing them will provide that flexibility. The Government will consult later this year on which types of buildings can be required to connect and in what circumstances.

On the hon. Member’s substantive point about why the Bill does not make provision about heat network delivery in zones, we are providing that zone co-ordinators shall have powers to decide what heat networks are built in zones and by whom. There are many ways in which heat networks could be delivered in zones and many ways in which zone co-ordinators could exercise their decision-making powers around delivery. As set out in the green finance strategy, we envisage heat network zoning bringing forward a significant increase in private sector investment in heat networks in England. Decisions around delivery may have significant implications for the scale of heat networks built in a zone, the pace at which networks are built and the effect on consumers. The Government intend to consult later in the year on how a zone co-ordinator may take those decisions, so that we get it right. Again, I emphasise that we will be consulting on this later this year.

Also, the way in which decisions are made may need to change over time, reflecting how the market matures and, indeed, learning from experience. The regulations will, of course, be subject to the affirmative procedure, which will allow for parliamentary scrutiny. I am sure that the hon. Member will play his part in such scrutiny, as will his colleagues.

Clause 188 - Enforcement of heat network zone requirements

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss clause 189 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

These are quite a simple couple of clauses. Clause 188 will allow the Secretary of State to make regulations about enforcing the requirements to apply within zones. It will support the previous two clauses on the delivery of heat networks in zones and the requirements placed on networks, buildings and heat sources within a zone. The clause includes the ability for the zoning co-ordinators to issue notices to people if they are suspected of not complying with the relevant requirements; to issue notices to outline what the person must do to satisfy the requirement; and to issue penalties to those who do not comply with the notices.

Clause 189 will allow the Secretary of State to make regulations about the penalties that apply for not complying with zone requirements under clauses 186 and 187 or for not complying with an information request under clause 185. That includes regulations about the maximum penalty amounts, the process for issuing a penalty, grounds for appeal, recovery of penalties, and to whom the penalties are paid.

Clause 190 - Records, information and reporting

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

This is another simple clause. The Government consider that various types of data will be essential for the identification and designation of areas as heat network zones and for the development of heat networks within them. Clause 190 will allow the Secretary of State to make regulations about zone co-ordinators and the zones authority collecting, storing, and sharing information about zones, including information relevant to identifying areas that would be suitable for the construction and operation of one or more district heat networks, as well as areas designated as heat networks under clause 185. It also includes information requests made to owners of thermal heat sources under clause 186. Information gathered by the zone co-ordinators and the authority, when carrying out activities related to the wider heat network regulations, would also be in scope of these regulations, as would information gathered in relation to the zoning methodology, including its review and update.

There are two circumstances in which information may be shared. First, a zone co-ordinator may be able to share zoning information with other zone co-ordinators, the zones authority and the regulator. Secondly, the zones authority may be able to share zoning information with zone co-ordinators and the regulator.

Clause 191 - Interpretation of Chapter 2

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 191 is the final clause in chapter 2, which concludes part 7 and the clauses on heat networks. The clause covers definitions for the heat network zoning clauses.

Alan Whitehead (Labour, Southampton, Test)

I have nothing to add, other than “Hooray, we’ve got to the end of that part!” We now have lots of regulations in place, which is a good thing.

Clause 192 - Energy smart appliances and load control

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 192 introduces part 8 of the Bill, which relates to energy smart appliances and load control. It defines the key concepts relating to that part, namely energy smart appliances, energy smart function, load control signals and load control.

The smart energy market is in its early stages but is growing rapidly, as we discussed in detail on Thursday. As the take-up of electric vehicles and other devices such as heat pumps increases, we need to remain agile in responding to new developments in the market. This is to ensure that we maintain grid stability and protect consumers from cyber-security risks. Transitioning to a smart and fully flexible electricity system will play a vital role in decarbonising the power system by 2035. Such a transition could reduce costs by up to £10 billion a year by 2050.

I will briefly set out some key definitions. Energy smart appliances are electrical consumer devices that are communications-enabled and capable of responding automatically to signals such as energy price changes. In response to such signals, they can adjust their electricity consumption or production in line with consumer choice and cost preferences. Load control refers to the act of sending and receiving those signals and adjusting the consumption of the product in response.

Subsequent clauses in part 8 will limit powers to make regulations to products with functions such as refrigeration, cleaning, battery storage, electrical heating, and air conditioning or ventilation.

Alan Whitehead (Labour, Southampton, Test)

We have now moved smoothly and efficiently to the question of energy smart appliances and load control; I will have something to say about load control later. The arrangements for energy smart appliances are important, given the increasing range of activities that appliances can now undertake. The specified purposes set out in clause 193—refrigeration; “cleaning tableware”, or dishwashing; “washing or drying textiles”, or using washing machines; and energy storage—are all circumstances in which things can be added to devices to allow them to operate independently, to operate at particular times and to respond to dynamic demand requests. For example, a chip can be put in a refrigerator to allow the appliance to respond to signals from outside saying, “Switch yourself off between 3 am and 4 am,” which will save some power or regulate the power in a better way.

Appliances increasingly have the potential to operate as mini-computers in their own right: they have IP addresses and various other things. It is possible to capture a series of washing machines that are smart-enabled and use them as locks under certain circumstances. Indeed, I think there was a recent prosecution of some young men who had done just that; I am not quite sure for what purpose, but they secured a number of smart devices in order to operate them in concert. It is important that we have energy smart regulations that enable us to deal with such circumstances and get them in hand. Of course, this is potentially a subset of the debate about AI and the extent to which our devices in the home may be subject to the control of other authorities entirely.

From the customer’s point of view, it is important that they know that they are in control of their own devices. Smart appliances offer various exciting advantages such as allowing people to change central heating controls before they get home, by pressing a button when they are 50 miles away, but the principle behind the security arrangements should be that the customer—the person in the home—is the eventual arbiter of how those things work. Does the Minister think that the way the clause is drafted will ensure that the customer—the person who is operating those smart systems, or who thinks they are—actually has eventual control, and particularly the consent for the operation of those smart devices in the way that we have described?

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I realise that this is an introductory clause and the Minister was doing some scene setting. The clause mentions load control signals and digital communications. I draw the Minister’s attention to my written parliamentary question No. 186867, submitted following a meeting I had with representatives of the Energy Networks Association. They tell me that to take forward a proper smart grid, the energy network companies need additional radio spectrum access. The Government need not just to put in place regulations, but to facilitate that radio spectrum access.

In response to my question, the Minister for Energy Security and Net Zero, the right hon. Member for Beverley and Holderness (Graham Stuart), said that the Government are moving forward on the issue with a study and a calculation of costs. I know that the Under-Secretary cannot write a blank cheque, but the reality is that radio spectrum access will be needed. I just put that on his radar.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank hon. Members for their questions and points. The hon. Member for Kilmarnock and Loudoun is right that this is just an introductory clause; we will talk about the regulations in much more detail during the rest of the morning and this afternoon. I thank him for putting that point about radio spectrum access on my radar.

The smart energy market is at an early stage. That is why we are regulating. We need to ensure that consumers and businesses, and indeed the grid and access to it, are protected. We intend to regulate in close consultation with industry and in a way that allows the market to evolve and supports innovation.

Clause 193 - Energy smart regulations

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss clauses 194 to 198 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clauses 193 to 198 establish the regulatory regime for energy smart appliances.

Clause 193 provides powers to introduce energy smart regulations in Great Britain. The regulations will mandate that energy smart appliances with specific purposes must comply with a set of requirements. The appliances that will need to comply with the requirements include those with specific purposes, such as electric vehicle charge points, or devices that are used in connection with the following specific purposes: refrigeration; cleaning battery storage; electric heating or ventilation, and air conditioning or ventilation.

Subsection (3) sets out a number of factors that the Secretary of State must have particular regard to when making regulations. Those include, for example, ensuring that the energy smart function does not undermine the delivery of a consistent and stable supply of electricity. Where an energy smart appliance does not meet the requirements set by the regulations, its placing on the market may be prohibited.

Clause 194 builds on clause 193, setting out that energy smart regulations may refer to technical standards and published documents. Energy smart regulations may also refer to requirements imposed under Acts of the Scottish Parliament. The clause establishes that prohibitions imposed by energy smart regulations may extend to load control for appliances that are not compliant with the regulations, and to any appliances modified in a way that would make them non-compliant with the regulations.

Energy smart regulations may prohibit the placing on the market of appliances that do not comply with the requirements of the regulations. The regulations may also prohibit the placing on the market of non-smart electric heating appliances and electric vehicle charge points. Finally, the clause specifies that energy smart regulations do not provide for enforcement action of any kind against the end user of an energy smart appliance.

Clause 195 makes provision for the enforcement of the requirements of energy smart regulations. The clause allows the Secretary of State to designate enforcement authorities that will ensure compliance with the requirements or prohibitions made under the regulations.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Before the Minister goes on too far, what timescale does he anticipate for the introduction of regulations under clauses 193 and 194 to mandate smart appliances?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I am not able to give any firm dates right now, but the Government’s hope is that we will move quickly to consultation on the regulations as soon as the Bill receives Royal Assent.

Relevant economic actors will be required to monitor and report on their compliance with the terms of the regulations, as well as to take specified steps to remedy any non-compliance. Clause 195(2) includes provision for a range of investigatory powers to track and assess non-compliance for use by enforcement authorities. Those include powers of entry, inspection, search and seizure, and powers to enable the testing of energy smart appliances by enforcement authorities. Finally, the Secretary of State may make payments or provide resources to the enforcement authority for the purpose of enforcing the energy smart regulations.

Clause 196 establishes that energy smart regulations may impose a range of sanctions for non-compliance. A full list of offences will be set out in the final regulations, on which the Government will consult publicly and which will be subject to debate in both Houses. I hope that answers the question from the hon. Member for Kilmarnock and Loudoun. The clause sets out several offences, including contravening requirements imposed by enforcement authorities or knowingly providing false information to enforcement authorities. Punishments for such offences will be provided for in regulations. The punishments will not include imprisonment. Regulations may also allow enforcement authorities to recover their costs by means of civil fines.

Clause 197 makes provision for the regulations to include a right of appeal to a court or tribunal against a requirement or civil penalty made by an enforcement authority. The right of appeal to a court or tribunal against a requirement or penalty for non-compliance, as set out in energy smart regulations, can include, but is not limited to, provisions set out in subsection (2). The right of appeal can be extended by the regulations beyond those parties against whom the requirement has been imposed. The Secretary of State may revoke or amend subordinate legislation, including an Act of the Scottish Parliament or the Senedd, where they consider it appropriate for the purpose of any provision falling within subsection (2).

Clause 198 sets out the procedure by which energy smart regulations will be made. The clause begins by setting out that energy smart regulations made under clause 193 may provide for exemptions or exceptions in their coverage. It requires the Secretary of State to consult before making regulations that subject a specific type of energy smart appliance to regulations or that amend the list of relevant purposes in clause 193. It also sets out the cases in which the affirmative scrutiny procedure is to be used when making regulations under clause 193. I commend the clauses to the Committee.

Clause 199 - Power to amend licence conditions etc: load control

Alan Whitehead (Labour, Southampton, Test)

I beg to move amendment 160, in clause 199, page 170, line 3, at end insert—

“(f) regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Amendment 161, in clause 199, page 170, line 21, after “section” insert

“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.

Clause stand part.

Clauses 200 to 203 stand part.

That schedule 17 be the Seventeenth schedule to the Bill.

Alan Whitehead (Labour, Southampton, Test)

We now come to the section of the Bill concerning licensing of load control. Load control is very much associated with the previous debate, inasmuch as it relates to how energy smart appliances operate overall, and such appliances will often operate under the aegis of a load controller—a body or person who is responsible for the network within which they work. It is important that we regulate and license not only the appliance but the bodies and people that control the load arrangements that smart appliances potentially give rise to.

We have some concerns about what all this means for energy security as a whole, particularly in the context of how smart meters are arranged through load controllers. A smart meter is essentially a smart appliance that enables things to happen in the way that we have described for other appliances, except that it is a meter that, made smart, can respond to external signals and is specifically designed to send material out independently of the customer of a particular energy account. Indeed, not having to send energy readings ever again is advocated as a good reason for having a smart meter—it will all work much better, it is said, because the meter will report readings to the person running the system and the customer will not have to sit with a torch at their electricity meter trying to read the numbers and probably getting them wrong, with interesting results ensuing.

The fact that these devices send out material independently of the householder or the system itself is generally a good thing. Smart meters send out information relating not only to bills, but to the status of the service coming into the home, and that information can be used in aggregate to look at how efficient a load system is in a particular part of the grid, or whether the grid is under strain. Certainly, meters in junction boxes and various other things can now predict when a particular area or part of the system might fail, so that the controller can intervene early to put the system right.

The way smart appliances work in relation to the system’s controller is tremendously advantageous to the resilience and integrity of the system as a whole because of the way they provide information independently of the customer. However, that has a potential downside. The information that goes out and the uses it may be put to are closely regulated, but smart systems often have elements that can, in principle, enable that information to be misused or sent out for purposes other than those that we generally think are appropriate for these systems to work as best they can.

Early smart meters were made by UK and German companies, as well as one or two others, and were installed by third-party installers on a generic basis across households. But more recently, a company called Kaifa Technology entered the UK smart meter market with an aggressively low-priced offer—for SMETS2 meters in particular—that is attractive to third-party installers because they save considerable money on installation as a result. As part of the smart meter roll-out, about 250,000 Kaifa smart meters, based on that company’s proprietary technology, have been installed. As a matter of interest, the price of those smart meters is about 30% lower than the prevailing price for smart meters, so that company has about a 6% or 7% entry into the smart meter roll-out market, with potentially a lot more to come by, say, 2025.

Kaifa Technology is controlled by a subsidiary of the state-owned China Electronics Corporation, or CEC, a company that manufactures technology for the Chinese People’s Liberation Army. This therefore falls very much into our security debates about telecoms—including Huawei’s substantial foothold in UK telecommunication markets, the UK Government’s reaction to Huawei technology, and the links that Huawei had to particular state actors for Chinese Government purposes—given the imperative in China, unlike in the UK, that everything produced in such circumstances, including delivery and technical design, is subject to the wishes of the Chinese Government.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

On a point of order, Mr Gray. I apologise to the hon. Member for Southampton, Test, but I want to make this point of order before the sitting concludes. We will shortly move on to discuss energy performance certificates and insulation of privately rented properties. In the past, I have been advised that I did not have to register the fact that my wife has a rental property and that her family have rental properties, but I seek your advice, Mr Gray, for the next sitting: will I have to make some sort of declaration before I comment on those areas of the Bill? I wanted to get that in now, so that a ruling can be made for this afternoon.

James Gray (Conservative, North Wiltshire)

If the interests are declared in the Register of Members’ Financial Interests and the right hon. Gentleman believes that they are relevant to the debate, it would be prudent for him to call the Committee’s attention to the register. That is not enforced entirely, but the question is whether there might be a perception of bias. Therefore, if the Member has interests that he believes might be of importance, it is probably worth his calling them to the attention of the Committee before he speaks.

Dr Whitehead, will you be concluding in the next 20 seconds?

Alan Whitehead (Labour, Southampton, Test)

I will not be that brief.

James Gray (Conservative, North Wiltshire)

In that case we will adjourn, it being as close to 11.25 am as it can possibly be.

Caroline Nokes (Conservative, Romsey and Southampton North)

Before proceedings commence, may I indicate that I am very relaxed and if Members wish to remove their jackets, that is fine by me?

Alan Whitehead (Labour, Southampton, Test)

On a point of order, Ms Nokes. It has come to my attention that an article published today by Politico says that the Secretary of State has

“signaled a coming U-turn on the government’s plan to put a levy on household energy bills to support the nascent hydrogen gas sector in the U.K.”

The article reports the Secretary of State as saying that

“while hydrogen was a ‘great opportunity’ for the U.K. it was ‘unlikely’ that the gas would be a major future source of domestic heating.”

Pertinent to this Committee, he said that the Government did not want to see

“a situation where a levy is penalizing people who don’t use it”

—almost the exact words that were discussed in Committee—and added that hydrogen would be

“a better bet for heavier industry”

and transport.

The Secretary of State was also reported as saying:

“We’ll look at ways to create a levy or a financing that works for everybody as best as possible”.

What I take from that is that the Government are actively looking at ways to undertake a form of levy different from the one we discussed in Committee recently. You will recall, Ms Nokes, that you had to cast the deciding vote on the relevant amendment. I am sorry that the Minister was unable to give us the information that the Secretary of State has given us in that article, in particular that the Government are actively looking at developing an alternative levy arrangement. It is more than conceivable that had that information been available to the Committee at the time, that vote may have had a different outcome. In particular, the convention of the Chairman casting the deciding vote in favour of the status quo, which you quite correctly did at that time in your position as Chair, Ms Nokes, could have meant that a vote could have been cast for a different status quo—that is, one in which the Government were actively looking

“at ways to create a levy or a financing that works for everybody as best as possible”.

The original formulation in the Bill would therefore have fallen, in effect.

Ms Nokes, do you have any guidance on how we could rectify this problem? Might we invite the Government to table a new clause, which could be discussed at the end of our deliberations on the Bill? As Chair of the Committee, would you accept a new clause later in the Bill that might allow a debate to take place in the light of the information we now have before us? It is entirely in your hands to decide, Ms Nokes.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

Further to that point of order, Ms Nokes. It is great to serve under your chairmanship. I am sure the hon. Member for Southampton, Test recalls the comments that I made in the fourth sitting when I abstained on the vote. Hansard will confirm the exact language that I used, but I believe I said that the Government had said to me that they were actively looking to table an amendment on Report. The article that has been produced today ties in with the comments that I made on the record a few sittings back, and I am relieved to hear that because it shows that we are moving forward. I do not believe there is any material change in what has happened because, as I said, I was told that the Government were actively looking at making an amendment on Report.

Alan Whitehead (Labour, Southampton, Test)

Further to that point of order, Ms Nokes. I thank the right hon. Member for Elmet and Rothwell for his point of order, which related to mine. Far be it for me to downplay his importance in proceedings but, although he is quite right, the material difference is that I was quoting what the Secretary of State said, even though the right hon. Gentleman was clearly well informed in what he said to the Committee.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Further to that point of order, Ms Nokes. I said in Committee at the time, in response to contributions from the hon. Member for Southampton, Test and other right hon. and hon. Members, including on the Government Benches, that we are listening and carefully considering the situation regarding that specific clause. We are listening to all the concerns raised in Committee, on the Floor of the House on Second Reading and in the other place. I gave that commitment in this Committee and see nothing that contradicts that in what the Secretary of State said to Politico this morning.

Caroline Nokes (Conservative, Romsey and Southampton North)

In response to Dr Whitehead, I want to confirm that what I cannot do as Chair of the Committee is go back in time. It is of course open to the Government to table further amendments in the later stages of the Bill, and I think we have had an indication from the Minister that that is potentially what might happen. I will say no more than that.

Caroline Nokes (Conservative, Romsey and Southampton North)

I remind the Committee that with this we are discussing the following:

Amendment 161, in clause 199, page 170, line 21, after “section” insert

“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.

Clause stand part.

Clauses 200 to 203 stand part.

That schedule 17 be the Seventeenth schedule to the Bill.

Alan Whitehead (Labour, Southampton, Test)

It seems rather a long time since I got through the first half of my remarks on this clause, but I am happy to continue. I will recapitulate briefly what is in the clause, and then we can move on to the next business.

Members will recall that, with amendments 160 and 161 and new clause 40—I appreciate that it will be voted on later in proceedings, not today—we are drawing attention to the possible risks attached to certain load controller activities relating to appliances that are under the authorisation of load controllers. As we have discussed, appliances that are used in smart energy networks may be able to undertake autonomous information and data transmission activities—and, indeed, activities relating to their own operation—independently of the consumer or the person who installed the device.

I previously drew attention to a company that secured a 6% or 7% share of the market in SMETS2 smart meters by putting its price 30% below the market average, thereby ensuring that energy companies have an interest in commissioning third parties to purchase and install that brand of meter. I pointed out that that company, Kaifa Technology, has very close links to—indeed, is controlled by—the state-owned China Electronics Corporation, which has been sanctioned by the United States regarding high-risk activities concerning data and electronics. Kaifa smart meters are not available for installation in the United States as a result of that sanction, yet in the UK we are apparently going ahead with no concerns whatsoever.

I am not saying that Kaifa smart meters are necessarily a source of the possible transfer-link use of data. I pointed out this morning that there are remote-switching facilities within smart meters, so it is possible that a smart meter could be switched off by an outside agency, or that its data could be transferred for not necessarily very good purposes. We have a pretty strong regulatory regime, which was recently strengthened by an information security Act. I am certainly not pointing the finger at Kaifa smart meters and saying that they are definitely not to be pursued, but we do not have any method in our current legislation—nor, indeed, in this Bill—that would enable scrutiny to be brought to bear on companies such as Kaifa in relation to national security and resilience, so that our questions can be answered. We should be as certain as possible that, should these things come to be a part of our smart energy network environment they do not, as it were, just slip in under the carpet. It should be done consciously through a review of what they mean as far as our energy security is concerned and, indeed, in respect of the security of smart energy networks.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

The hon. Gentleman is making an important point about energy security and the ability for outside players—certainly, if we consider this from a Chinese perspective—to take control. On energy security, does he share my concern about the fact that 98% of the materials used in renewable energy come directly out of China? Does that not in itself represent a similar security risk to the one he is outlining?

Alan Whitehead (Labour, Southampton, Test)

I thank the right hon. Member for his intervention, but I do not quite share his implied view that everything that comes out of China needs to have that level of security clearance. There are concerns about the proportion of our solar panels that are made and manufactured in China, for example, and a concern that one particular country has effectively captured the market in solar panels. It would be a good idea for those purposes, not for the purposes I am talking about, to rectify that situation. China is also increasingly manufacturing components for wind turbines and various other renewables, so yes, it would be a very good idea to have a much more diverse supply chain for renewables. As far as China is concerned, that is an issue of commerce; I am talking about a potential issue of national security and resilience. Yes, it involves the same country, but there are different concerns and, indeed, concerns about other countries that may be in the same position as I outlined as far as their smart energy technology offerings are concerned.

Our amendment 160 seeks, by the insertion of a new paragraph (f), to

“regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”

Amendment 161 defines—something we always should do in Bills—high-risk vendors as

“vendors of appliances that pose potential or actual security and resilience risks to energy networks”.

That would enable the Department to take a proactive stance on our energy security and resilience, not necessarily to pronounce guilt on anybody but to review the situation with respect to our overall energy security and resilience. Indeed, new clause 40 sets out circumstances in which the Government may invoke those sorts of arrangements, and Members will see that they are exceptional circumstances. The new clause would give the Government permission to do that but only when very real concerns about national security and resilience are expressed in respect of the things that the Secretary of State might review.

This suite of amendments, and the new clause, would attach, as it were, that concern and its potential resolution to the otherwise very good things in the Bill as far as load control and smart energy networks are concerned. We have already discussed those things and said that we are generally happy with the clauses, but we think the addition of a requirement to take account of particular circumstances would be a prudent and helpful thing to do at this juncture, particularly as we are in the process of completely overhauling all our smart energy facilities. A lot of equipment and new forms of load control will come in over the next few years, so it is really important to get it right at the outset.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

It is an absolute pleasure to serve once again under your chairmanship, Ms Nokes. I thank the hon. Member for Southampton, Test for his amendments; he is of course right to consider the security impacts of load control devices. We share his concern that grid security should be protected, which is why I am happy to reassure him that we have already spent considerable time preparing means to manage the risks associated with hostile actors and the transformation of our energy system.

The outcome of our recent consultation on delivering a smart and secure electricity system confirmed our intent to regulate all organisations that remotely control large electrical loads, using the Network and Information Systems Regulations 2018, or the NIS regulations. Under those regulations, load controllers would be required to take appropriate and proportionate security measures to manage risks to their network and information systems. They would also be required to report to the relevant authority incidents that disrupt the continuity of services and take action to rectify those incidents.

The application of the NIS regulations in the energy sector in Great Britain is based on outcome-focused principles, using the cyber assessment framework developed by the National Cyber Security Centre. This approach focuses on proportionate risk management. Moreover, the licensable activities established through the powers in the Bill could impose security requirements on those organisations within its scope. The licence would complement our separate enhancements to the NIS regulations made through the Bill.

Finally, the National Security and Investment Act 2021 includes a broad range of powers enabling the Secretary of State to intervene in transactions that give rise to national security concerns. That includes the power to scrutinise transactions based on national security risks for electricity purposes. That incorporates acquisition of ownership of load controllers, who control electricity on behalf of their customers. On that basis, a power to direct a load controller on national security grounds, which new clause 40 would introduce, would be excessive in comparison with the rest of the electricity sector.

The Secretary of State does not have powers to direct private companies outside of an energy emergency or crisis scenario. Establishing such a precedent may risk undermining the development of the sector, with little compensatory benefit in additional security protections. Given our existing measures to control foreign investment, and our intentions to increase the cyber-resilience of load controllers, an additional power for the Secretary of State to direct on national security grounds would be disproportionate.

Amendments 160 and 161 centre on alleviating any security risks posed at the device level in the provision of load control. Amendment 160 would give the Secretary of State the power to regulate or prohibit the provision of load control by or to appliances supplied by vendors that are deemed to be high risk. Amendment 161 would define that group as

“vendors of appliances that pose potential or actual security and resilience risks to energy networks”.

I assure the hon. Member for Southampton, Test that measures to maintain the security of energy smart appliances are already in place. For example, the Electric Vehicles (Smart Charge Points) Regulations 2021, which are already in effect, require most private charge points for domestic and workplace use to meet minimum device-level cyber-security requirements. In addition, we committed through our response to the consultation on delivering a smart and secure electricity system to ensure that licences for the purpose of domestic and small non-domestic load control should include cyber-security requirements. We are confident that, taken together, the existing regime is sufficiently robust and that a further power to amend the licensing condition is unnecessary. I hope that with those reassurances the hon. Member will be able to withdraw his amendment.

Clause 199 sets out how the Secretary of State may modify conditions of licences granted under the Electricity Act 1989 and certain licences granted under the Gas Act 1986 for purposes of load control. It also provides powers for the Secretary of State to modify industry codes that are maintained under those licences for such purposes. More generally, the powers give the Secretary of State the flexibility to amend existing regulatory arrangements to reflect the introduction of a new licensing regime for load control. That new licensing regime will be introduced using the powers provided for in schedule 17.

Clause 200 sets out the process that the Secretary of State must follow before making changes to the conditions of licences, or documents maintained under them, for load control or related purposes, as set out in clause 199. The requirement to consult the parties listed in subsection (1) before making changes to licence conditions or documents maintained reflects standard practice in such cases and is consistent with other clauses. When modifying the conditions of a licence, the Secretary of State must specify the date on which the modification will take effect and publish the details of any modifications as soon as reasonably practicable after they are made.

Clause 201 establishes that the Secretary of State may make a modification to a standard condition of a licence using clause 199. It also establishes that that does not prevent any other part of the condition from continuing to be regarded as a standard condition. In essence, the power will allow the Secretary of State to make targeted changes to parts of a licence, without changing the overall status of that licence, or changing any other standard conditions to that licence. When the Secretary of State makes changes, the Gas and Electricity Markets Authority will amend future licences so that the amended standard conditions apply to future licensees. The authority will also publish the modification to the licence.

Clause 202 extends the regulatory provisions in relation to licensing that were established in the Gas Act and the Electricity Act to load control. The clause amends the Gas Act, the Electricity Act and the Utilities Act 2000 to apply several provisions of those Acts to the Secretary of State’s exercise of regulatory powers to load control. More specifically, the clause will extend several of the duties and obligations on GEMA within the Acts, particularly those in relation to protecting the interests of current and future consumers of electricity. GEMA would need to apply to the Secretary of State when exercising powers under clauses 195 to 197. Finally, clause 202 defines “gas licence” and “electricity licence”.

Clause 203 introduces schedule 17, which makes provision for the regulation of the load control of energy smart appliances. Schedule 17 amends the Electricity Act, allowing the Secretary of State to make regulations that amend the list of activities subject to the licensing framework to include activities connected with load control. The schedule sets out the terms of that regulation-making power, including the extent to which the regulations can make consequential or transitional provisions.

Alan Whitehead (Labour, Southampton, Test)

I heard what the Minister had to say about the amendments. I am pleased to hear that the Government are taking this seriously, and I hope that the measures that he suggests by which they will do so are sufficient for the purpose. I think that the Secretary of State in question for the National Security and Investment Act is the Chancellor and not the Secretary of State for Energy Security and Net Zero, so the option to do anything about it will be at one remove from his Department, although I am sure the Secretary of State would be able to communicate with the Chancellor were there serious issues.

On the understanding that the Government are going to pursue this as a serious issue as part of the development of energy smart networks, and will incorporate that view at the heart of the arrangements, I beg to ask leave to withdraw the amendment.

Clause 204 - National Warmer Homes and Businesses Action Plan

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

The Government have carefully considered the effect of the clause, which was added on Report in the Lords. On 17 May, I tabled an amendment indicating my intention to oppose the clause. The Government do not consider that it would be effective in helping to deliver our commitments to improve the energy performance of buildings and to deliver net zero. However, I know that opinions among Committee members differ, and I look forward to the discussion that we may well be about to have.

The heat and buildings strategy, published in autumn 2021, sets out how the Government plan to reduce emissions from buildings and provides a clear long-term framework to enable industry to invest and deliver the transition to low-carbon heating. The Climate Change Committee already plays a key role, providing independent advice and scrutiny, and holding the Government accountable by publishing statutory progress reports to Parliament. Those are comprehensive overviews of the Government’s progress. The clause would simply duplicate those efforts.

The Government have already set out our aim to phase out the installation of new and replacement natural gas boilers from 2035, in line with natural replacement cycles, while scaling up the installation of low-carbon heating. We recognise that there are many options with the potential to play an important role.

The Government remain committed to the aspiration for as many homes as possible to reach energy performance certificate band C by 2035 where cost-effective, affordable and practical, as set out in the clean growth strategy. There has been good progress towards achieving that aim, with 47% of homes in England having reached EPC band C, up from a measly 14% in 2010.

In our net zero growth plan and energy security plan, the Government announced that we will publish a consultation on options for upgrading houses in the owner-occupier sector by 2023. The content of the consultation has not yet been finalised, and we need to gather further evidence on the potential impacts of interventions in that sector. More time is needed to ensure thorough consideration of options in this area, and the clause would not allow that time.

We are also taking significant steps to encourage businesses to reduce their energy demand through voluntary schemes and regulations. In the 2020 energy White Paper, the Government proposed that the trajectory for the minimum energy-efficiency standard for non-domestic rented buildings should be EPC band B by April 2030, with an interim milestone of EPC band C by April 2027.

We are evaluating the responses to our consultation and will publish the Government response in due course. It is important that the impacts, such as those on business and supply chain readiness, can be fully considered. The clause would pre-empt the response and commit the Government to a timeframe for implementation different from the one that has been consulted on.

The Government have set an aspiration to introduce the future homes standard by 2025. We will publish a full technical consultation for it in 2023. We intend to introduce the necessary legislation in 2024, ahead of implementation in 2025.

I thank Baroness Hayman and Lord Foster of Bath in the other place for raising these matters.

Alan Whitehead (Labour, Southampton, Test)

We are in a curious position with this clause, which is a bit akin to my writing to the then Energy Minister to ask him to reintroduce the Bill as soon as possible. The Government at the time seemed not to want to introduce their own Bill as soon as possible, whereas we wanted them to do so. Clause 204 was introduced as an amendment in the House of Lords, so it has come to us as a substantive part of the Bill. We therefore find ourselves in the position—if I can persuade Opposition Members to vote accordingly—that we support the Bill as it stands and the Government apparently do not.

That is made more curious by what the clause actually says. With one small exception to do with dates, it takes things that the Government have already agreed to do—by the way, as far as I know, the future homes standard is not an aspiration; it is something the Government have already said will be mandatory by 2025—and says that the Secretary of State must produce an action plan for how they will be done. That seems to me a pretty good idea in any legislation, and in anything that anybody says will be the case in legislation. It is really not good enough to go around saying that things may well happen and that there might be legislation, and then not have any idea how that legislation can be properly discharged.

The clause puts that right by making sure that there is some kind of plan in place for these things to be achieved. It draws attention to the following targets: achieving

“100% of installations of relevant heating appliances and connections to relevant heat networks by 2035,”

which is in the energy security strategy; achieving

“EPC band C by 2035 in all UK homes where practical, cost effective and affordable,”

to which the clean growth strategy and the heat and buildings strategy contain specific commitments; achieving

“EPC band B by 2028 in all non-domestic properties”—

that is in a consultation that has already taken place, and the Government intend to produce either regulations or legislation to ensure that it happens, as I have mentioned—and introducing

“Future Homes Standard for all new builds in England by 2025,”

which the Government have already said they want to do.

In a sense, the clause is a bit of a break with how things have been done before, but in another sense it is not, because it just recapitulates things that already exist, puts them in order and states that we need some form of plan to ensure that they happen. Frankly, I am really surprised that the Government have decided that they want to knock the clause out. It is not superfluous. In fact, it supports the Government in delivering their plans and ensures that we all know where we stand.

That brings me to the purpose of this Committee. The amendment that the Government tabled to remove the clause has not been selected, which means that the only way for them to achieve their desired outcome is for the Committee to vote against clause stand part. That puts Committee members in a different position from that of voting on an amendment.

The likelihood of anybody having a go at any member of this Committee for voting in favour of this Bill is remote. Therefore, I would have thought that Committee members should be allowed to exercise their own judgment as to whether they support or oppose the clause. By asking us to vote against clause stand part, the Government are in effect asking the Committee to vote against itself. If members on both sides of the Committee support the Government’s targets and aspirations—and I would have thought that everybody does—and if they think that it would be a good idea to encapsulate them in an action plan, I do not think that they should be sanctioned for voting in favour of that and, in a sense, securing Government policy.

That is code for saying that no one should be pulled up by the Whips—although perhaps the Whips have a different idea—if they vote in favour of the Bill. I assume, although I do not know this yet, that every Opposition member of the Committee will vote to retain the clause, and I would hope that every Government member will also—

Caroline Nokes (Conservative, Romsey and Southampton North)

Order. May I gently suggest, Dr Whitehead, that you have moved away from the substance of the clause and are somewhat straying into whipping arrangements?

Alan Whitehead (Labour, Southampton, Test)

As always, you are right, Ms Nokes, so I will temper my remarks. I hope that common sense will prevail and that a thumping majority will ensure that the clause is retained so that the Bill can progress to its next stage intact. The clause is important to Government policy, so it should not be taken out and disabled in the way suggested.

Olivia Blake (Labour, Sheffield, Hallam)

It is a pleasure to serve under your chairship, Ms Nokes. I rise to speak in defence of clause 204, and I agree with the shadow Minister, my hon. Friend the Member for Southampton, Test, that the Government have suggested an interesting tactic.

Our housing stock has been described as the least energy-efficient in Europe. That means we are the least prepared to absorb future price hikes, like those experienced in recent years, and to address future temperature changes. In England alone, more than 13 million homes—59% of them—are below a C rating on the energy performance certificate standard. As a result, housing is one of the main sources of carbon emissions in the UK, accounting for around 20% of total emissions.

We should be making massive efforts and strides to improve in this policy area, yet energy efficiency programmes have been cut and home insulation rates have plummeted over the past decade. In 2013, the coalition cut energy efficiency programmes, after which insulation rates fell by 92%. The number of energy efficiency insulations peaked at 2.3 million in 2012, yet fewer than 100,000 upgrades were installed in 2021. That is rather pathetic, it has to be said.

The Bill and clause 204 in particular provide a golden opportunity to put in place the financial structures and programme to give the necessary upgrades to the 19 million homes in our country that are below band C on the EPC scale. Clearly, that is what a Labour Government would do.

Mark Jenkinson (Conservative, Workington)

Has the hon. Lady heard of our ECO4 scheme?

Olivia Blake (Labour, Sheffield, Hallam)

Yes.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Has the hon. Lady heard of the issues with the ECO4 scheme? The energy companies have not met the target number of properties because it needs to be rewritten.

Olivia Blake (Labour, Sheffield, Hallam)

Those are the exact problems. In recent years a number of Government schemes have either failed because they have not had the workforce to deliver them, or experienced challenges because people have been drawn into other roles, particularly in the building sector and in relation to cladding issues and so on. That is exactly why the Opposition would be very pleased if the clause were protected. We need that action plan. Delivery is only worth something when it happens. We cannot just have targets that we repeatedly continue to miss. It would be exceedingly challenging to argue to the public that we should not prioritise getting their bills down by £1,000 a year or come up with an action plan to deliver that.

Katherine Fletcher (Conservative, South Ribble)

Yes, the British public would experience significant benefits through bill reductions as a result of insulating their homes, but who is the hon. Lady suggesting should pay for the intervention that would produce that benefit? It would be a significant scheme, especially given that 30% of the housing stock is really old. Who would foot that bill?

Olivia Blake (Labour, Sheffield, Hallam)

Moving away from this Bill, Labour has a fully costed plan for achieving that and it is targeted at the 19 million homes.

Andrew Western (Labour, Stretford and Urmston)

Does my hon. Friend agree that although the Government are reticent about placing this clause on the statute book, surely the fact that they are Government targets means the money will be found anyway?

Olivia Blake (Labour, Sheffield, Hallam)

Absolutely, and I will come to that point. This issue is so significant: it is important that we find the funding for these sorts of interventions because almost 9,000 neighbourhoods in England and Wales have very low incomes but higher than average energy costs because of poor insulation. That requires Government action, and I fully support Labour’s plans, which I believe would cost £12 billion a year—I might be wrong about that.

Kerry McCarthy (Labour, Bristol East)

It is £6 billion.

Olivia Blake (Labour, Sheffield, Hallam)

Sorry, £6 billion—I have doubled my ambition. That is a large amount of money, but it would be very welcome in meeting the challenges we face.

I am not alone in my concerns about delivery in this space. In January, the Environmental Audit Committee rightly said that we need a national war mobilisation to improve energy efficiency and reduce carbon. The public are crying out for action to address fuel poverty and household emissions: 80% of respondents to National Energy Action’s polling supported funding retrofits for those on low incomes and, according to the New Economics Foundation, 64% of Conservative voters and 65% of people in the north support a national retrofitting taskforce.

Without the clause, the Bill will be another missed opportunity to tackle the cost of living crisis, to bring forward the emergency energy efficiency measures we need, and to start a national 10-year mission for home insulation. Delivery is important, and without an action plan I am not clear how those millions of homes, and the millions of people living in them, will benefit from better energy efficiency. We need to get on top of our carbon emissions and we need to ensure that housing is not forgotten, given its vast contribution to emissions.

It would be a mistake for the Government to remove the clause. All it is asking for is a warmer homes and a business action plan to set out how His Majesty’s Government intend to deliver energy efficiency. It is important to keep that clear ask in the Bill. I will be deeply regretful if the Government do not support the clause, because it will be another missed opportunity.

Andrew Western (Labour, Stretford and Urmston)

It is a pleasure to serve under your chairship, Ms Nokes. At the risk of repetition, I too rise to defend clause 204. It is interesting that, in my first Bill Committee, we appear to be having something of a groundhog day moment. When we had a similar discussion about low-carbon heating last week, the Minister stood up and gave us various assurances that these things would be done, while resisting with all his might any attempts to compel the Government to do that in law.

It is incredibly challenging when the Minister says that superb progress is being made on these issues and that we have gone up to 40% over the past 13 years. In fact, on current projections we have something in the region of 200 years to go to upgrade the energy efficiency of the UK’s draughty housing stock. National Energy Action says that progress on energy efficiency is too slow, and the UK Business Council for Sustainable Development has calculated that the pace of the Government’s recently announced scheme would take almost 200 years to reach homes in need of upgrade. It is clear why the Opposition are so keen to see the targets in the Bill; clause 204 is therefore so important.

I warmly welcomed the addition of the clause in the other place because although the Minister talks about the energy White Paper, the net-zero strategy, the heat and building strategy that was published alongside it, and the future homes standard, none of those things actually compel the Government to act. That is the problem. The Government can miss their targets time and again because there is nothing that forces them to take the action needed. Warm words will not provide warm homes—it is that simple. This will not get us where we need to go unless it is on the statute book. We know that because we are already missing the targets.

Bim Afolami (Conservative, Hitchin and Harpenden)

I respect the hon. Gentleman greatly. Obviously, it is a matter of political debate whether he accepts the warm words of the Conservative party—that is a legitimate, democratic debate that we should have—but what exactly does he propose would be the remedy for his not trusting the Minister’s word? Ultimately, that is his political point. He is entitled to make that point, and he has made it clearly, but trust cannot be legislated for, so I gently suggest that he accept that some things will always be a matter of political debate. I trust the Minister’s word. The hon. Gentleman does not have to do so, but that is ultimately what we are in politics to do—to argue and debate these things.

Andrew Western (Labour, Stretford and Urmston)

I thank the hon. Gentleman for his intervention, but whereas trust cannot be legislated for, targets can. It would be a very simple remedy to place the targets in the Bill in order to remove any question of trust, and to give the industry and homeowners struggling under the weight of high energy bills certainty that the Government are taking the action required. In fact, I do not see this as a question of trust: it is a practical step. Indeed, if Conservative Members are so satisfied that the Government will take the action needed to meet the targets, why be fearful of their inclusion? If they have no issue with hitting a target, why not place it in the Bill? That is the fundamental point.

By not including the targets they have set, it opens up the argument that the Government do not feel they will meet them. In making that argument, I remind colleagues of the words of the National Infrastructure Commission, which says:

“Government is not on track to deliver its commitments on heat or energy efficiency…A concrete plan”—

which is what the clause would require the Secretary of State to introduce within six months of the Bill becoming an Act—

“for reducing energy demand is required, with a particular focus on driving action in homes and facilitating the investment needed.”

Katherine Fletcher (Conservative, South Ribble)

I share the hon. Gentleman’s zeal and passion for insulating the UK’s homes, but he has referred again and again to a concrete plan and investment, and I cannot believe that either of those things come with a price tag of zero. Given that it is important to be fiscally responsible, will he outline how he plans to fund the implementation that he wants to write into the Bill?

Andrew Western (Labour, Stretford and Urmston)

The same applies to the Government’s targets. The fact is that we are being asked to take the Minister’s word that the Government will deliver on the targets, so there must already be a plan to do so. There must already be the funding to deliver, so what is the problem with enshrining this in law? That is the point we are advancing. Either the Government are putting the targets forward in a performative way, with no hope, plan or funding to deliver on them, or they are so assured that the targets will be achieved that there is no need for them to be placed in legislation—it is one or the other. Either way, I am sure that Conservative Members would want to satisfy themselves that the funding is in place; otherwise, the targets are a total waste of time anyway.

When we hear from the Minister, I would be grateful to know where the funding will come from to achieve the targets. Indeed, can we stand by the targets in any way, shape or form? That is the central point that I do not understand, because if the Government are going to deliver on this, what is the problem? If they are not going to deliver, all Committee members should be seeking to hold the Government’s feet to the fire.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

It is a pleasure to serve under your chairmanship, Ms Nokes. I was not going to speak, but the more this debate has gone on, the more confused I have got, so I thought I may as well throw some words out there anyway. Obviously, it is the job of the Opposition to hold the Government to account, but I find it bizarre that it now seems to be the job of the Opposition to make the Government stand by their own targets.

I understand that the clause was inserted in the other place. The Government keep telling us that the other place is very important and that we should rely on the expertise in the Lords, which is supposed to be a revising Chamber. That is ironic, because it was the Lords who brought forward the Bill in the first place. If we have to trust their ability and that it is a revising Chamber, it would seem logical to agree with the revisions that the Lords make. Otherwise, it undermines the point of having the Lords in the first place—which takes us to the position of the SNP: we would abolish it—but the Government tell us that it is an important place. We have heard only this week about how many people are scrambling to get into the Lords and are disappointed not to get in. Then we talk about trust and not being about to legislate for trust. Ironically, Nadine Dorries seemed to be saying yesterday that there is a real lack of trust in this Government.

Caroline Nokes (Conservative, Romsey and Southampton North)

Order. I gently suggest that we need to be debating this clause, not the aspirations of some former Members.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I know; I was just linking to where the clause came from and wanted to put these matters out there.

I do support the clause, although the future homes standard is effectively only for England. I have already raised my concerns that the Government are not moving fast enough, because they are still at the consultation stage. Subsection 1(d) is really important. The Government should publish an action plan showing how they are going to bring forward the future homes standard. That will give certainty to developers. They need to plan ahead for the technical requirements that they need to apply to new housing developments. It is important that a look-ahead is given to developers as soon as possible.

In terms of all the other targets, given that some of them go beyond the life of this Government anyway, I find it hard to understand why the Government are so reticent to accept the targets for energy efficiency installs. We can argue about whether Labour did more installs than are currently happening in terms of the number of energy efficiency measures, but the most important thing is the upgrading to EPC band C, to which the clause refers.

The Government can talk about the progress they have made in getting properties to EPC band C, but it is still only hovering around the 50% bracket, and that is after 12 years in government. If they are going to hit the target by 2035, there is no doubt that much more structured delivery plans will have to be put in place. Clearly, the properties that we can tackle today are the ones that are most easy to upgrade. It is going to get harder and harder the further into the programme we go. It is important that the Government are held to account on their targets and that they come forward and say how they are going to meet those targets.

Finally, on ironies, I agree with what the Labour party has been saying on energy efficiency, but this has come just after it has done a U-turn on the green new deal and the green investment it promised us all. I will leave it there, but there are a lot of contradictions on both sides, I would say.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

It is a pleasure to respond to the debate. There is some confusion at the minute. Indeed, I was slightly confused at the beginning of the debate, given that the hon. Member for Southampton, Test seemed at one stage to be whipping on behalf of the Government and giving advice to Conservative Members— I urge all colleagues on this side not to listen to his words. If I am not mistaken, he was suggesting that the clause we are against was tabled by the Government in the other place; Baroness Hayman is a Cross-Bench peer and Lord Foster of Bath is a Liberal Democrat peer.

Alan Whitehead (Labour, Southampton, Test)

For clarity, I did not say that it was introduced by the Government, nor would I say that, because it certainly was not. The point I was trying to make was that it is now a part of the Bill, not that it was introduced by the Government in the other place.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I am glad that is clarified for the Committee. For further clarification, we are seeking to revise the Bill back to its original state as drafted and remove an amendment that was made by Cross-Bench and Liberal Democrat Members of the House of Lords. I believe that is a relatively regular occurrence for the House of Commons. There should be no confusion on that.

Again, as they were when we were talking about smart meters, the Opposition are such a glass half-empty kind of party. We have made huge progress in the energy efficiency of UK homes. I understand why the Opposition do not want to speak about this: when they left office only 14% of homes had an EPC grading of course; now, after 13 years of Conservative Government, the proportion stands at 47%, and we are driving forward to get it over 50% soon. As for the suggestion that we do not have a plan to move forward, the Government do have a plan. We have set out a heat and buildings strategy and we have announced further measures in the net zero growth plan, which was announced just recently.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

I thank the Minister for giving way again. In this clause that the Government are trying to take out, there is reference to upgrading homes—it is a condition that the Government must abide by—

“where practical, cost effective and affordable”.

Can he provide a definition of what is practical, cost-effective and affordable? I could not get that out of the previous Secretary of State for Business, Energy and Industrial Strategy.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

What is practical and affordable will obviously be determined by individual circumstances and the market conditions at the time. Let me also say that I would have welcomed any acknowledgement from the Scottish National party, who are in government in Scotland, that we are working together across these islands to improve insulation and that we have made great progress as an island nation in getting towards 50% of all homes being rated EPC level C or above.

As I was just going on to conclude, we will take no lectures from the Labour party on the costings of projects, given that just last week it had to announce a staggering U-turn on its £28 billion investment in green technology and jobs, and it is yet to come up with any answer about how it will fund the £100 billion of pledges that it has announced thus far.

In terms of costings, a plan, moving this country forward, delivering on insulation and delivering on this entire green strategy, I have much faith in the Government’s position and in what we are seeking to do here today. That is why I advise all my colleagues to vote with the Government this afternoon.

Clause 205 - Power to make energy performance regulations

Caroline Nokes (Conservative, Romsey and Southampton North)

With this it will be convenient to discuss the following:

Clauses 206 to 208 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 205 will provide the Secretary of State with the power to make changes to the existing Energy Performance of Buildings (England and Wales) Regulations 2012 to ensure that they are fit for purpose and contribute effectively to improving the energy efficiency of premises. Following the UK’s withdrawal from the European Union, it is necessary to create new primary powers to permit changes to be made to the 2012 regulations, as that power was lost with the repeal of the European Communities Act 1972.

Clause 206 will enable the Secretary of State to make changes to the Energy Performance of Buildings (England and Wales) Regulations in relation to new premises. That includes new premises in the process of being constructed or changed, as well as new premises whose construction or adaption is planned but has yet to be started. The changes will ensure that the anticipated energy usage and energy efficiency of new premises are taken account of.

Clause 207 enables us to ensure that we have an effective enforcement regime underpinning the energy performance of premises policy by amending existing requirements. We will review the current enforcement regime to ensure that there are sufficient enforcement options in place, with a view to improving compliance with the energy performance of premises framework. The existing regime includes civil penalties, and the clause enables us to amend those penalties or provide for new civil penalties by enforcement authorities up to a maximum of £15,000.

Finally, clause 208 provides that the regulations made under part 9 may amend, repeal or revoke provisions made in primary legislation and that this must be done through the affirmative resolution procedure. It also provides that the affirmative resolution procedure will be used if new criminal offences or civil penalties are created. This will ensure that there is parliamentary oversight of the uses of the power. I commend the clauses to the Committee.

Alan Whitehead (Labour, Southampton, Test)

Clause 205 is the beginning of the part of the Bill on the energy performance of properties. I must admit that I thought for a moment there was going to be a spectacular U-turn on the previous clause, but I was sadly disappointed when the Minister decided which way he was really going to vote. I fear the same result in respect of this part of the Bill.

Let me speak briefly to our new clauses 41 and 42, which would considerably strengthen the Bill’s provisions on the energy performance of premises. They relate specifically to energy performance regulations for existing premises. Rather like clause 204, which is now not in the Bill but contained previous Government aspirations and claims in respect of outcomes, new clause 41 relates to things the Government have already said about energy performance certificates for properties in the private rented sector, about what should happen in respect of the improvement of properties in that sector to bring them up to an appropriate band, and about the amount specified in legislation that private landlords should spend on getting their properties up to that level before they are exempted from having to make further improvements.

The really important bit in new clause 41 would require the Secretary of State to make regulations

“amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2)”—

which contains exemptions—

“all tenancies have an energy performance certificate (EPC) of at least Band C by 31 December 2028”.

The new clause would also require the Secretary of State to make regulations

“amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019”—

which Members will recall introduced a £3,500 cap on the cost to landlords of achieving band E—to raise to £10,000 the amount that should be invested before landlords are exempt.

Those are reasonably ambitious outcomes for the private rented sector, but they were completely presaged by the Government’s previous proposals, which we supported at the time. Specifically, in September 2020 they consulted on improving the energy performance of privately rented homes in England and Wales. The consultation had proposed outcomes at its heart, but—well I never—there has not yet been a Government response. Only three years have gone by. We hope that there may be a response one day fairly soon, so that progress can be made.

The proposed outcome of the consultation—the favoured option at the time—was exactly as set out in subsection (1) of new clause 41: raising the energy performance standard of private rented properties to band C, a phased trajectory to get there by 2028, and a £10,000 average per-property spend under a £10,000 cap. Everything in the new clause is already there in what the Government said they would do in respect of private rented sector energy efficiency. The only difference is that the Government have not actually done anything about it.

I recently looked up the reaction to the proposals, and a number of commentators and advisers are saying, “Well, landlords, you perhaps ought to get yourselves steeled up to the idea that your properties, to be lettable in future years, will have to be band C, and that you may have to spend up to £10,000 to make your properties lettable at that point.” By the way, that seems a relatively small amount to have to spend, bearing in mind that this is essentially a question whether a property is of merchantable quality. In any other area of commerce, if it were not of merchantable quality, it would not be sold. These measures, if implemented, would ensure that properties were merchantable for letting purposes as far as efficiency standards are concerned, and landlords would be required to spend that relatively small amount before they were exempted and to use every endeavour to get their properties up to that point.

Mark Jenkinson (Conservative, Workington)

In my constituency of Workington, I have some wonderful conservation areas with lovely old stone-built houses. A Labour council will not allow the replacement of single-glazed windows with uPVC double glazing, for example, which we know works well for energy efficiency. Why does the hon. Gentleman think that they would not be of merchantable quality?

Alan Whitehead (Labour, Southampton, Test)

If the hon. Member cares to go back to the consultation in 2020, he will see that there are certain exemptions, depending on things such as conservation areas, from getting properties up to the standard that we are discussing provided that other things are in place. I have no particular insight into the workings of the hon. Member’s local authority, but it may be that something like that is at the heart of those concerns.

The point is that in general, we would certainly support—and we did at the time—what is set out in the consultation and the Government’s declaration of policy intent. One area where energy efficiency needs to move forward quite rapidly is the private rented sector; after all, that is the housing sector with the worst energy efficiency record. It is just not good enough to stand by the idea that properties in band E, which is a very low energy efficiency band, should be at that level any longer—certainly not in the 2020s, when we are trying to get all the properties that we can up to a standard fit for 2050.

We are trying to ensure a national roll-out of energy efficiency measures so that properties are as efficient as they can be. That way, we will not need to go round and retrofit them again coming up to 2050. We will already have in place the future homes standard and so on, which will ensure that new builds all go that way, so why should private rented properties be such an apparent exception?

Surely, the people running private rented properties have the same duty as the rest of us to ensure that their properties are as energy efficient as possible. I am sure all Members have had people coming to their constituency surgeries to complain about the dreadful conditions in their private rented property and ask how someone can have let that property out to them and apparently got away with the extremely low energy efficiency rating. Constituents have been told, just as I have, that not much can be done about it right now. Properties can be let out by private landlords in that condition, and with present arrangements, only a very small increase in energy efficiency is required to allow landlords to continue to let out properties, while everybody else—we hope—will have sped ahead to get properties really high up the EPC scale. It would be an enormous anomaly, and indeed quite a scandal, if landlords continued to rent out properties with a very low EPC level.

The aim of new clause 41 is to implement measures to ensure that the consultation proposals are put into law. I do not know why the Government have spent so long responding to the consultation. As I said, the market generally thinks that what was consulted on is what will happen, and it is telling landlords to steel up for that. However, as yet, there is no evidence that they will actually have to do that, because no one is doing anything about turning the ambitions into fact.

We are well beyond the second anniversary of the consultation’s closing, with no sign of the Government coming up with a plan to do what they said they wanted to do in the first place. New clause 41 would do the Government a great favour, frankly, by putting the ambition into legislation forthwith and ensuring that everyone gets on with it. In our hearts, that is what we all want to happen, notwithstanding how we might vote today.

New clause 42 would have a slightly more limited but nevertheless important effect. It would ensure that a property’s energy performance certificate—circumstances are changing substantially in this respect—reflects the extent to which it can operate on a two-way basis, exporting electricity as well as importing it.

In the not too distant future, many or most houses will have within their curtilage, or close to it, methods to charge electric vehicles located near their property. That should be the signal for the property to have an EPC rating that reflects the fact that it can be part of an energy generating arrangement. Under proposed schemes, when the homeowner is not using their electric vehicle, the property could use it as a mini power station, exporting electricity for the good of the grid, and for the balancing purposes of the grid, but without detriment to the overall charging arrangements of the vehicle.

At present, such arrangements effectively depresses the potential energy performance certificate outcome of a property. New clause 42 suggests an action plan to improve energy performance certificates, stating:

“Within 12 months of the date on which this is Act is passed, the Secretary of State”—

this new clause gives them a nice long time compared with other new clauses—

“must conduct a review…that sets out how new technologies can improve the energy usage and efficiency of premises…Such a review must include analysis of the energy efficiency benefits of energy optimisation technologies and bi-directional charging from vehicles to premises…Where any energy efficiency benefits are identified by this review, the Secretary of State must make provision…for recommendations to be made about the improvement of the energy efficiency and usage of new and existing premises.”

In other words, the Secretary of State must bring into the mainstream new technologies relating to energy performance certificate measures, and bring those EPCs up to date with what we know is now happening with energy efficiency in the housing market. The two-way process is increasingly becoming part of the household energy landscape.

I hope that new clauses 41 and 42 are helpful. Unfortunately, after the previous debate, I do not have any great faith that the Government are about to leap on them and put them into law. At the very least, I hope they highlight the fact that there is a great deal of huff and puff and not much blowing the house down. That was a badly strained metaphor, I know, but it would be a rather good idea if we went a bit further than that and did something about the legislative arrangements that will have to follow when the new ideas for better energy efficiency in homes are put forward.

These are two particular instances—in the private rented sector and two-way energy production at properties—but as we have seen the Government have effectively set out targets, ideas and aspirations in a number of other areas, and while they have not necessarily done nothing, they have not done things commensurate with the ambition. This is one case where that certainly happened in the not-too-distant past. I hope that the Committee will accept the new clauses. I appreciate that they will not be voted on until the end of our proceedings, but I hope that when we do so Members, and possibly even the Government, will decide that this is something that they would like to put in the Bill after all, and vote accordingly.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

Further to my point of order this morning about declarations of interest, I have spoken to the Commons Registrar who has informed that because I personally make no financial gain from property that my wife owns it does not have to be in the register; however, I have to declare an interest at this moment that my family has a substantial property portfolio. The comments that I am about to make, however, are based on the concerns of landlords, estate agents and letting agents in my constituency.

One of the problems is if we start to over-legislate at this time. The hon. Member for Southampton, Test pointed out that, importantly, the Government are still consulting on the report. We are in danger of focusing purely on the one area of energy efficiency in the private rented sector, and in effect making landlords do things that the owner of a private property does not have to do, with the cost being passed on to tenants. Subsection (3)(a) of new clause 41 would

“enable Local Authorities to give notice to landlords that they wish to inspect a property, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time”.

In other words, that would enable constant inspections and attempts to move forward with insulation.

We have said throughout that we have to take the public with us on this agenda. In some areas, we move too quickly to legislate on something that the Government are consulting on and that has not been properly thought through. Several times, my hon. Friends have intervened to ask where the money is coming from to do such works. At the moment, as I look at the Bill and the £10,000 cap, it is coming from the tenant. At a time when there is a political argument on both sides of the House about how people can get on the housing ladder, increasing their rents even further because the landlord has to do something that people in the private sector do not have to do will not help that cause.

There is no doubt that energy efficiency will reduce the amount of fuel that has to be used to heat a home. That is a scientific fact. We hear that it could save £1,000 a year, but that assumes that everything stays level and that we do not have to put another levy on electricity bills. I remind colleagues that when nuclear power came along, it was said that it would be so cheap to produce that we would not be able to meter it. That turned out to be far from the truth.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Hear, hear.

Alec Shelbrooke (Conservative, Elmet and Rothwell)

There you go, praise from the other side.

One of the points made by the hon. Member for Southampton, Test was about getting in and retrofitting now, and not having to do it again in 2050. New clause 42(1) states:

“Within 12 months of the date on which this Act is passed, the Secretary of State must conduct a review of the “Improving Energy Performance Certificates: action plan” that sets out how new technologies can improve the energy usage and efficiency of premises.”

I have no doubt of the intent with which that was written, but it can be interpreted very differently. It could mean that as time goes forward, the regulations will change and those with band C EPCs might now be told to come to a level that was not required at this stage of retrofitting.

One thing that I am hearing from estate agents in my constituency—of course, there is another side to what is going on with rising interest rates—is that landlords are dumping private property and getting out of the market. The hon. Member for Southampton, Test said—I have the exact words—that there was a steel within the industry of people moving towards this because they thought the regulations were coming. What it has actually done is make a lot of people think, “I am not spending £10,000 on this property. I am never going to get an £800 a month increase in rent over a year to pay for it, so I will dump the property.”

The whole point of waiting on a consultation is that we know that Governments can take a long time. The hon. Gentleman, as a reasonable man, will recognise that there have been many buffeting winds since 2020, when the report was produced, and I hope that attention will go back to those issues. I am sure that my hon. Friend the Minister will make the point that the Government have every intention of moving forward on these bills, but to take the report at this stage and bind it into law in the Bill would be, I think, a great problem.

The hon. Gentleman also commented about constituents who come to us and talk about the energy problems in their homes. I do not know how many colleagues have had constituents come to them with the problems they have had since heat pumps were fitted. A lot of grants are available for heat pumps, so they are out there. If they are not fitted alongside the system being upgraded, they do not work, and I have constituents come to me to say that. The pipe network is not big enough for the pressure; it is simple fluid mechanics. That is another example of a rush into a particular area without the technical back-up. People end up stuck—in this case, it is a council property, and people are stuck on the question of who will repair the system, because the gas-fired boiler cannot be put back in. It is another example of running too fast in a particular direction.

My hon. Friend the Minister has my support in not backing new clauses 41 and 42, because they are acting in haste. That haste could have serious unforeseen circumstances for those using the private rented sector for their accommodation. If we drive more and more landlords out of the business, that sector will decrease and there will be competition for rent because more people will be looking for it. That will come on top of the rent increases caused by doing this retrofitting. The report still needs a lot of careful consideration by the Government before it comes into force.

I am sure that my hon. Friend the Minister will react to some of those comments, but he has my support.

Jo Gideon (Conservative, Stoke-on-Trent Central)

On a point of order, Ms Nokes. I want to seek a little clarification after my right hon. Friend the Member for Elmet and Rothwell declared his interest. I am not planning to speak on the new clause, but before we vote should I make members of the Committee aware of my entry in the Register of Members’ Financial Interests as an owner of a rental property?

Caroline Nokes (Conservative, Romsey and Southampton North)

I think that via that point of order you have made Members aware of your interests. As Mr Shelbrooke indicated, he sought advice from the registrar of interests and I always find it best to be cautious and over-declare rather than under-declare.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I thank the hon. Member for Southampton, Test and my right hon. Friend the Member for Elmet and Rothwell for their comments on the new clauses. In answer to the question of why we have not produced a full response to the consultation, we are committed to raising standards in the sector in line with our ambition, set out in the clean growth strategy, and we will publish a summary of responses to the consultation on improving standards in the private rental sector this year.

Alan Whitehead (Labour, Southampton, Test)

This year?

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Yes, this year.

We are continuing to refine the policy design to ensure that the costs and circumstances relating to energy efficiency improvements are fair and proportionate for landlords and tenants, as my right hon. Friend the Member for Elmet and Rothwell pointed out. The economic headwinds that have been buffeting us, and the changing circumstances in the private rented sector in particular, have made it difficult at the minute, but as I said, we will be publishing our response—a summary of responses, anyway—this year.

New clause 41 seeks to require the Secretary of State to make regulations in relation to energy performance in existing rented premises. His Majesty’s Government agree on the need to improve the energy efficiency of buildings to lower energy bills and deliver carbon savings to meet our net zero and fuel poverty targets. Indeed, this is reflected in the Government consultation on proposals to raise the minimum energy efficiency standard for privately rented homes. Under the Energy Act 2011, the Secretary of State already has powers to amend the private rented sector regulations in order to raise the minimum energy efficiency standards and set the dates by which landlords must comply with the new regulations. The new clause would not allow us to reflect the valuable feedback that the Government received from the consultations in the final policy design, which is essential to ensure that the final policy design is fair and proportionate for landlords and tenants. As I have said, the Government have committed to publishing the summary of responses by the end of this year.

Let me turn to new clause 42. In September 2020, we published the energy performance certificate action plan, in order to ensure that consumers can trust energy performance certificates and to make sure that certificates are accurate and reliable. Certain actions are expected to require regulatory change under the new powers to be implemented. The energy performance certificate is designed to rate the energy performance of a building, as considered as an asset that passes from one occupant to another during sale or rental.

As those occupants may or may not possess energy optimisation technologies or an electric vehicle with bi-directional charging capability, it is not currently considered appropriate to assume a benefit from this in the calculated energy performance rating. Including this nascent technology, which relies on consumer behaviours and equipment not integral to the premises, would increase the complexity of the EPC scheme. Bi-directional charging is a promising technology, but it is not yet viable for use in the mass market.

Clause 209 - Energy savings opportunity schemes

Caroline Nokes (Conservative, Romsey and Southampton North)

With this it will be convenient to discuss clause 210.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

We now turn to part 10 of the Bill, which deals with the energy savings opportunity scheme, which I will refer to as ESOS.

Clause 209 provides a power relating to ESOS. ESOS mandates energy audits of large undertakings at least once every four years, which cover their buildings, transport and industrial processes. The audits result in cost-effective recommendations for improving energy efficiency. The power would replace the repealed power in the European Communities Act 1972, under which the UK established ESOS in 2014, and without which ESOS is a frozen scheme and cannot be updated.

ESOS is important to the UK’s plans to meet net zero targets and reduce energy costs for businesses. The existing scheme’s net benefit is estimated at £1.6 billion. The power covers four core options, as set out in the July 2022 ESOS consultation response: to standardise ESOS reports, improve the quality of audits, add a net zero element to audits, and require public disclosure of information from ESOS reports. It also covers two potential longer-term options to mandate action and extend ESOS to medium-sized enterprises, which are for future consultation. The power will enable the amendment of ESOS, or the establishment of such a scheme, and sets out the general provisions to make regulations.

Clause 210 sets out the application of ESOS, including in relation to geographical application and determining responsibility for energy consumption for the purposes of ESOS. It allows regulations to set the description of undertakings that fall within scope of ESOS, and to provide for two or more participants to be treated as a single participant. It would allow ESOS to extend to a far wider range of undertakings, subject, of course, to future consultation. I therefore commend clause 209 to the Committee.

Alan Whitehead (Labour, Southampton, Test)

I do not have anything to say on these clauses, other than to note that we are now into the energy savings opportunity scheme, and that the Minister is indeed right that schemes would have been frozen under EU regulations. However, I am not yet sure whether what would have been the case under the EU regulations is reflected accurately in the things coming forward. I hope that it is. The scheme looks okay to me, but I would like an indication from the Minister that, in effectively updating the scheme for the purposes of this legislation, nothing has been lost from what previously was there.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I am happy to give that guarantee. Indeed, one of the benefits of our now not being in the European Union is that we can devise and implement schemes that are fit for businesses and, indeed, homeowners—people within the United Kingdom—depending on the circumstances that we are facing at the time.

Clause 211 - Requirement for assessment of energy consumption

Caroline Nokes (Conservative, Romsey and Southampton North)

With this it will be convenient to discuss clauses 212 to 214 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 211 makes provision for regulations to set out when, how and by whom an ESOS assessment should be carried out, and other requirements. It introduces a new power for future details from ESOS reports to be published to increase the transparency of the scheme and promote the uptake of energy efficiency measures.

Clause 212 enables regulations to set out functions and requirements relating to ESOS assessors, including who may be an assessor, the maintenance of assessor registers, and requirements on designated bodies that maintain assessor registers. New powers are provided to the Secretary of State or the scheme administrator to ensure the standards of assessors. The powers will allow intervention where there is evidence that an assessor or designated body is not carrying out its responsibilities under ESOS regulations appropriately, to improve the overall quality of ESOS reports.

Clause 213 includes a power to introduce new requirements for ESOS participants relating to the production and publication of an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. The requirements aim to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures.

Clause 214 introduces a power to impose new requirements on ESOS participants to achieve energy savings or greenhouse gas emissions reductions. It sets out two approaches: ESOS regulations may either require participants to take specific actions, or may set out other requirements, such as the public reporting of actions, that aim to encourage participants to take those actions. Regulations would be able to specify that the requirements should refer to a cost-benefit analysis. As stated in the Government response to the ESOS consultation, the former approach would be subject to further consultation before any decision was taken regarding its introduction. Regulations making such provision would, under clause 218, also be subject to the affirmative parliamentary procedure.

Alan Whitehead (Labour, Southampton, Test)

I have nothing to add to what the Minister said. I am happy for the clauses to stand part of the Bill.

Clause 215 - Scheme administration

Caroline Nokes (Conservative, Romsey and Southampton North)

With this it will be convenient to discuss clauses 216 and 217 stand part.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Clause 215 provides powers for the effective administration of ESOS. It enables regulations to make provision about the appointment of scheme administrators in any of the four nations of the UK, whose functions may relate to administration and compliance monitoring and/or the enforcement of scheme requirements. It also enables regulations to require businesses to have regard to the scheme administrator’s guidance or pay fees to cover the costs of the scheme’s administration.

Clause 216 enables regulations to make provision for scheme administrators to enforce ESOS requirements, including in relation to penalties. It also enables the creation of offences so that breaches could become criminal rather than civil matters in future, should that be desirable. Clause 217 enables regulations to allow the right of appeal for anyone subject to any decisions, penalties or enforcement under ESOS. In the case of financial penalties, it requires a right of appeal to a court or tribunal.

Alan Whitehead (Labour, Southampton, Test)

Clause 215 is about administrators and the administration of schemes, and those administrators will have at their elbow action plans determined by previous clauses. It is good to see in the context of this afternoon’s discussions that a part of the Bill has action plans as a requirement and that those action plans will be positively administered. Having a plan seems to be a bit of a sine qua non for administrators; we do not seem to have that in other parts of the legislation. The Opposition have been assiduous in trying to put that idea forward, but it is nice to see that that line has been breached at least as far as these clauses are concerned.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I am very happy that the hon. Gentleman is very happy.

Clause 218 - ESOS regulations: procedure etc

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

This speech is very short. Clause 218 requires the Secretary of State, before making regulations, to consult those likely to be affected, including the respective devolved Administrations where provisions relate to devolved matters. It also describes where the affirmative procedure would be required—for example, if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.

Clause 219 - Directions to scheme administrators

Caroline Nokes (Conservative, Romsey and Southampton North)

With this, it will be convenient to discuss clause 220.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

This is another short one. Clause 219 provides the Secretary of State with a power to give directions to a scheme administrator, with which it must comply—for example, when views differ over the interpretation of legislation or when the Secretary of State wishes to order a scheme administrator to remove an individual from its designated register of persons who may be appointed as a lead assessor. Clause 220 enables the Secretary of State to provide or arrange for financial assistance to scheme administrators and ESOS participants.

Alan Whitehead (Labour, Southampton, Test)

I will just mention in passing that there is an interesting progression in clause 219, relating to directions. Subsection (1) says:

“The Secretary of State may give directions to a scheme administrator.”

So far, so good. Subsection (2) says:

“The power to give directions under this section includes a power to vary or revoke the directions.”

From that, it appears that the Secretary of State has the power to revoke their own directions—

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

He has the power to change his mind.

Alan Whitehead (Labour, Southampton, Test)

Indeed, but presumably if the Secretary of State changed his mind, he would not start with subsection (1) in the first place, so it is a bit of a strange formulation. I think that had the Opposition moved that as an amendment, the Minister would have said it was superfluous and unnecessary. I do not know why that particular formulation has been put in but we know that subsection (3) says:

“A scheme administrator must comply with any direction given to it under this section”—

however confusing—so it is probably all right then. But I must admit that subsection (2) looks a bit odd.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

I understand the hon. Member’s question and the direct answer is yes, the Secretary of State can revoke his own direction. I think it is important to set that out in the Bill and, indeed, there is precedent for it in comparable provisions in section 51 of the Climate Change Act 2008, passed by the then Labour Government.

Written evidence reported to the House