Fifty-Eighth Report - Energy bills support

Select Committee

Public Accounts Committee HC 1074 16 June 2023

Report Status Government responded

Conclusions & Recommendations 28 items (3 recs)

Source View on Parliament website

Government Response (AI assessment · 28 of 28 classified)

Accepted 18

Acknowledged 5

Deferred 3

Not Addressed 1

Rejected 1

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Fifty-eighth report from Session 2022-23 · published 24 Sep 2023

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Recommendations & Conclusions

3 results

4 Conclusion Deferred

Provide analysis of policy impacts on businesses and prevent a financial cliff edge after March 2023.

Conclusion

HM Treasury and the Department do not fully understand the pressures the non-domestic sector will face when the EBRS ends in March 2023, or the potential risk of insolvencies. Many organisations are suffering financially from the aftermath of the pandemic … Read more HM Treasury and the Department do not fully understand the pressures the non-domestic sector will face when the EBRS ends in March 2023, or the potential risk of insolvencies. Many organisations are suffering financially from the aftermath of the pandemic and this has been exacerbated by recent high energy prices. The Department wanted the EBRS to achieve economic benefits, but it risks undermining this if its decision to withdraw support results in increased insolvencies. From April 2023, support for the non-domestic sector will reduce significantly when the Department replaces the EBRS with the Energy Bills Discount Scheme (EBDS) if energy prices remain high. While gas prices have recently fallen significantly from the record-high levels last year, some non-domestic consumers will not feel the benefit if they are trapped in fixed tariffs that were set in late- summer 2022. Additional financial support for energy bills is available for Energy and Trade Intensive Industries, but not for other sectors that can have high energy usage, such as the hospitality sector. HM Treasury expects that other changes from April 2023, such as reduction in business rates, will offset reductions in energy bills support for these sectors. The challenges of the non-domestic sector dealing with rising energy bills has exposed the lack of regulation and visibility that Ofgem and the Department have over the way non-domestic energy market operates. Recommendation 4a: The Treasury should, in parallel to its Treasury Minute response, provide details of its analysis of how the changes to business rates, taxes and energy support will affect businesses across different sectors, and outline how Energy bills support 7 it will ensure that businesses will not face a financial cliff edge after March 2023. It must also monitor and report on the effectiveness of the additional financial support made available to Energy and Trade Intensive Industries in ensuring the resilience of those industries. Rec Show less

Government Response Summary

The government agrees but deflects, stating the department will use findings from Ofgem’s non-domestic market review to inform future actions, with further details to be set out in the summer and plans to be taken forward by Autumn 2023, rather than the Treasury providing an immediate analysis.

HM Treasury

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26 Conclusion Deferred

Marginal electricity pricing links high gas prices to consumer bills, incurring huge public costs.

Conclusion

The approach to pricing electricity in the UK – known as marginal pricing - means that high wholesale gas prices results in high energy bills for consumers. This is because all electricity generators in the market are paid a fixed … Read more

Government Response Summary

The government agrees with the conclusion and states it aims to publish a second Review of Electricity Market Arrangements (REMA) consultation in Autumn 2023. The REMA programme will consider various options to protect consumers from future price spikes and ensure they benefit from lower cost renewables.

HM Treasury

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28 Conclusion Deferred

Decoupling electricity and gas prices needs careful reform for long-term consumer benefits.

Conclusion

We asked about whether the vast majority of the additional cost of energy to UK customers was going into increased profits for the energy sector. Energy UK told us that in looking at decoupling electricity and gas, the government should … Read more

Government Response Summary

The government agrees with the committee's observation and plans to publish a second Review of Electricity Market Arrangements (REMA) consultation in Autumn 2023. This programme will consider various options to shield consumers from future price spikes and ensure they benefit from lower cost renewables, with decisions on reforms taking place throughout the programme.

HM Treasury

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