 House of Commons |
Session 2009 - 10 Publications on the internet Energy |
The Committee consisted of the following Members:Gosia McBride, Committee
Clerk † attended the
Committee Public Bill CommitteeTuesday 12 January 2010(Afternoon)[Hugh Bayley in the Chair]Energy BillClause 4Electricity
supply
levy 4
pm Question
(this day) again proposed, That the clause stand part of the
Bill.
The
Minister of State, Department of Energy and Climate Change (Joan
Ruddock): I was in the middle of dealing with questions
about EU emissions trading scheme receipts asked by the hon. Member for
Wealden and had explained, somewhat to the dismay of certain members of
the Committee, that the problem was that we did not yet have a decision
from EUROSTAT—the EU statistical agency—on how EU ETS
receipts should be classified in the public finances. For that entirely
reasonable reason, we were not able to publish them in advance of such
a decision, but we had tried to provide some information. That has been
done—the hon. Gentleman is aware of this—by including the
receipts in other taxes and royalties in that line in the relevant
tables in Treasury publications. I understand why he considers that
unsatisfactory, and we have gone further to indicate the sorts of
moneys involved. Those moneys are put as public finances forecasts in
the Budget and pre-Budget report and are based on the likely number of
allowances and the secondary market price for
carbon. The
hon. Gentleman may or may not be aware that the 2009 pre-Budget report
noted that, to date, UK carbon auctions have raised more than
£350 million and that future revenue was set to rise to about
£2 billion in 2013-14. Those moneys are contained in
the Consolidated Fund, and as with other moneys, which are raised in a
variety of ways, they are, of course, used to fund the
Government’s programmes. They therefore constitute public
finance. If we took the money from those sources, we would essentially
be using public money directly to fund the CCS projects, but our
preference is to put the obligation on electricity suppliers, paid for
by the suppliers in the form of a levy. I do not know whether the hon.
Gentleman seeks further clarification, but I assure him that that is as
much information as I can provide him
with. Charles
Hendry (Wealden) (Con): I am very grateful to the
Minister; she has been genuinely seeking to be helpful. On the UK
carbon auctions to which she refers and the figure of £2 billion
for 2013-14, it would be helpful if she let us have—not
necessarily immediately because she may not have it—the
corresponding figure for each year from now for the whole Budget
period. As a result of auctioning the EU ETS allowances, do the
Government expect to raise other amounts that would come to the UK on
top of those figures or would that be the totality of
them?
Joan
Ruddock: Unless I stand to be corrected, I imagine that
that would be the totality of them. It is not obvious to me where else
moneys would come from. The hon. Gentleman will be aware of the EU
raising finance through allowances from the new entrants reserve, which
will fund some EU projects, but that is a separate matter, although the
UK will benefit because we will undoubtedly have EU-funded projects in
the UK. That is our
expectation. I
think that I have explained the situation and given as much information
as possible, but it is important to distinguish, for the matters
covered in the debate, the fact that the Government’s position
is not to take public funds directly to fund projects 2 to
4—and, indeed, project 1 now—but to do that through the
levy system. Of course, that is the matter that we have been
debating.
I was asked
about the contract for difference, and I said that I would attempt to
answer that question before going on to the main stand part debate. The
hon. Member for Wealden raised the matter and related it to the carbon
price. He is right to point out the benefits of a contract for
difference related to the carbon price. Clearly, over time, the amount
of payment through the levy could therefore conceivably reduce, which
would be an obvious advantage.
We have
consulted on the matter and two proposals were put last year. One
proposal was the contract for difference, linked to the quantity of
CO2 abated, and the other was to make an additional payment
linked to the amount of CCS electricity supplied. We need to do further
analysis with the Treasury, and we will, of course, need to take a
decision in time for the launch of the competition for further
projects. So there is no final decision on that, but we share the hon.
Gentleman’s view that there could be an advantage in the
contract for difference linked to the carbon price.
I also want
to raise a matter discussed this morning. Questions were asked about
which suppliers would have to pay the levy. The debate was about large,
small and local companies and so on, and in seeking to clarify, I
indicated that the levy would be imposed only on licensed suppliers.
That is indeed our preferred course.
Joan
Ruddock: But we do, of course, have to consult. Therefore,
it was premature of me to say definitively that we will do it that way.
For the sake of accuracy and clarity, let me make it clear that that is
our current intention, but it will be subject to
consultation. Anne
Main (St. Albans) (Con): I thank the Minister for giving
way, as I raised that point with her earlier in her speech this
morning, when she said that perhaps very large suppliers would have a
different tariff. Does she imagine a multi-tiered approach to levies,
perhaps going from the largest to the smallest
provider?
Joan
Ruddock: The hon. Lady is confusing suppliers and
supplies. I think that she is referring to when I mentioned
representations from intensive users. It is the
people receiving the largest amount of supplies who have made
representations that, for example, there could be a ceiling on the
amount of supplies that should suffer the levy. That goes back to the
suppliers, but those who use the electricity have made those
representations. This is not a distinction between large and small
supply
companies. Mr.
Brian Binley (Northampton, South) (Con): I am grateful to
the Minister for that explanation. I asked about and relationship
between suppliers and the levy on big users, because costs
proportionately fall more heavily on the smaller than on the large
business. I asked but did not get a clear enough answer. She has now
clarified the situation to the extent that I need more clarification
with regard to my question.
Joan
Ruddock: Everyone is suggesting that they are confused.
Let me be clear: I am not saying anything absolute on this matter. I
simply raised this issue—regrettably perhaps—and admitted
to the fact that we have received representations from people who are
heavy users and want some limit on how the levy paid by the supplier
companies will impact them. I am not in a position to give the hon.
Gentleman any further information. We have provisions in the Bill, and
I have made it clear that we have no intention to exempt at the moment,
despite representations from a variety of sources—including
renewables, which we also discussed—with the sole exception of
exported, not imported, electricity. We will not be looking to exempt.
That is the position now, but things may change substantially; we are
in a new field altogether, as regards the economics and the progress of
the project. I am afraid that I cannot help the hon. Gentleman further,
and I hope that I am not making things more complicated by what I have
just
said.
Joan
Ruddock: I will, but we are in danger of complicating
things and not moving any further. There is a limit on what I can say
at the moment, but I stress again that we will have to undertake
further consultation, including on the
regulations.
Mr.
Ellwood: It is exactly a question about consultation that
I want to ask. Who will conduct the consultation? Does the Minister
envisage the new office of carbon capture and storage taking that on,
or will the Department push it
through? Once
we complete our debate here and the Bill, hopefully, becomes an Act,
the details of the discussions will be lost until we get more direction
from either the Minister through a statement or the new office. If a
company that supplies electricity has a mix of one third-two thirds,
where one third comes from a renewable source that produces no
CO2 emissions, will that have any effect on the size of its
levy?
Joan
Ruddock: I have made it clear that there is absolutely no
intention at the moment to exempt the supply that is derived from
renewable sources. I have made that absolutely clear throughout the
debate; it is not an area of confusion.
On the other
question that the hon. Gentleman posed, the consultation will be a
formal Government one in the normal way. The Government will set out
proposed plans for regulations, and they will be part of a formal
Government consultation, which will take the normal 12 weeks. The
Government will, of course, publish the results, as is normal, and
respond. [Interruption.] Perhaps I am not the one
to sit down. I think and hope that I have succeeded in answering the
questions that were outstanding at the point at which we were
interrupted.
Simon
Hughes: May I remind the Minister of one? I asked her
about the cost. What will be the total amount of the levy and the cost
of the project? How much will people have to pay? I would be grateful
for her
answer.
Joan
Ruddock: I have answered the question, but the hon.
Gentleman may not have found it sufficient, because all I provided him
with was the total sum and the range, which we think, from memory, will
be between £7.2 billion and £9.5 billion. That
is the amount of money that would be raised by the proposed levy. How
that will be disbursed and exactly where in that range we will end up
depends on the actual projects and their nature. Until we know that, it
is impossible to arrive at the final sums. So I say again that I am
honestly giving the Committee as much information as possible at the
moment. 4.15
pm
Simon
Hughes: That is the global cost, but the other question in
which consumers will be interested is what it will add to the bill. Can
the Minister give us parameters for
that?
Joan
Ruddock: I think I can do that. We have suggested that we
are probably looking at a 2 to 3 per cent. increase in bills, looking
towards 2020—about £15 to £17 per annum per
consumer. There will be no immediate effect on bills and, probably, no
significant effect before 2015, which is quite far off. We are
concerned about any addition to customers’ bills, but we have to
see this in the round and see what we can provide for customers. Energy
security is, very topically, what consumers will want and we believe
that this is a substantial way of providing that energy security and
appropriate energy mix.
The clause
gives the Secretary of State the power to raise funds, based on the
provision of financial assistance to CCS demonstration projects, which
could include support for the retrofit of CCS to the full capacity of
the power stations hosting the demonstration projects, should a
decision be taken to do so in the future. Those funds will be raised
through the charging of a levy on electricity supplies, with the levy
to be paid by electricity
suppliers.
Mr.
Ellwood: I am grateful to the Minister for giving way and
appreciate that I am testing her patience early in the proceedings. If
we create a technology that is not only successful here but is exported
to other parts of the world—which I think is what she implied
earlier—is there any mechanism by which the taxpayer would
benefit by getting some form of rebate? Is there any way—through
patents or other methods and financial structures—in which this
amount, which could be up to £9.5 billion, could be repaid to
the taxpayer?
Joan
Ruddock: The taxpayer will get value for money, if this
succeeds, in energy security. The taxpayer would get benefits from any
form of exports; there are jobs in exports. I have no doubt that there
are benefits for taxpayers. I do not envisage at the
moment—though one can never say never—a means of clawing
back money. If under the contract payments are made according to
differences in the carbon price, that will properly reflect how well
things are going in the market. We are going down the route of a levy
only because we understand that these projects would not be
commercially viable unless the payments were made. Therefore, we have
to be prepared to commit that money and to bear the burden—I
have indicated that it will not be huge, but there will be a small
increase in consumer bills in due course—because of the benefits
that will accrue overall. We would not envisage trying to claw back; we
are trying to give people confidence in going ahead with these
projects, with support. We want to do that as efficiently as possible
and at the best cost. None the less, I do not anticipate what the hon.
Gentleman
suggests. The
clause sets out a non-exhaustive list of matters that may be covered by
the regulations governing the levy mechanism. In particular,
provisions allow the regulations to prescribe to what types of supplies
the levy will apply and the suppliers who will be liable to pay the
levy. Provisions under the clause will also allow for different rates
of levy to be set in different cases. The clause allows for measures to
apply relating to the enforcement of the levy, including the penalties
for late or
non-payment. Before
making regulations under the provision, the Secretary of State must
consult the administrator and such other persons as he considers
appropriate. Importantly, regulations must be laid in draft and
approved by both Houses of Parliament before they can be made, ensuring
that Parliament will have the opportunity to scrutinise the detailed
provision made about the levy. The provisions in the clause are
required to set the framework for the levy mechanism needed to support
UK demonstration of CCS.
|
| |
| ©Parliamentary copyright 2010 | Prepared 13 January 2010 |