Delegated Legislation Committee: Draft Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026

The Committee consisted of the following Members:

Chair† Sir Desmond Swayne

† Beavers, Lorraine (Blackpool North and Fleetwood) (Lab)

† Billington, Ms Polly (Parliamentary Under-Secretary of State for Energy Security and Net Zero)

† Carling, Sam (North West Cambridgeshire) (Lab)

Cross, Harriet (Gordon and Buchan) (Con)

† Dixon, Anna (Shipley) (Lab)

† Eagle, Maria (Liverpool Garston) (Lab)

Farron, Tim (Westmorland and Lonsdale) (LD)

† Heylings, Pippa (South Cambridgeshire) (LD)

† Jermy, Terry (South West Norfolk) (Lab)

† Jones, Gerald (Merthyr Tydfil and Aberdare) (Lab)

† Jopp, Lincoln (Spelthorne) (Con)

† Poynton, Gregor (Lord Commissioner of His Majesty's Treasury)

† Stuart, Graham (Beverley and Holderness) (Con)

† Sullivan, Dr Lauren (Gravesham) (Lab)

† Thomas, Bradley (Bromsgrove) (Con)

Webb, Chris (Blackpool South) (Lab)

† Witherden, Steve (Montgomeryshire and Glyndŵr) (Lab)

George Stokes, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Tuesday 1 September 2026

[Sir Desmond Swayne in the Chair ]

Draft Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026

16:30:00

The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Ms Polly Billington): I beg to move,

That the Committee has considered the draft Energy Prices Act 2022 (Extension of Time Limit) (No. 2) Regulations 2026.

It is a pleasure to serve under your chairmanship, Sir Desmond. In the autumn Budget, the Government acted to reduce energy costs to benefit all households with a domestic energy contract. We did that by closing the energy company obligation scheme to new costs on bills and by moving 75% of the domestic cost of the renewables obligation to the Exchequer. Those decisions are already making a real difference. From April 2026, they took an average of £150 in costs off household energy bills, and they continue to keep bills lower than they would otherwise be.

The renewables obligation exists to support renewable electricity generation through a system of tradeable certificates. The scheme is closed to new applications, and the first generators will come off the scheme from April 2027; the scheme will close finally in 2037.

The scheme has been instrumental in building the UK’s renewable energy sector. It supports about 35 GW of generation capacity and about 30% of total UK electricity generation. The core of the renewables obligation scheme is a process in which electricity suppliers purchase certificates from renewables generators. Previously, suppliers recovered all the costs of complying with the obligations from consumers via their electricity bills, with Ofgem reflecting those costs through the price cap.

From 1 April, the Government have instead provided grant funding to electricity suppliers to cover 75% of the domestic share of the costs in Great Britain. We have also taken steps to ensure that those savings are passed on: for customers on standard variable tariffs, Ofgem has factored the lower policy costs into the price cap; and for customers on other domestic tariffs, including fixed tariffs, the Government issued a legally binding direction requiring suppliers to pass through the savings in full.

The latest price cap illustrates why that action matters. On 26 August, Ofgem announced that the cap for 1 October to 31 December will increase by 4% to £1,723 for a typical household, driven by ongoing wholesale price volatility as a result of the war in the middle east. Ofgem has been clear that the increase is likely to be felt primarily in gas bills, with electricity bills remaining broadly flat. Without the action we took at the Budget, the cap would be significantly higher still.

The draft regulations are concerned with the legal basis for continuing to deliver the bill reduction measures. Section 13 of the Energy Prices Act 2022 provides the power we are using to take such steps to reduce people’s bills, but the power in section 13 is time-limited and may be extended only by six months at a time. Earlier this year, Parliament approved regulations extending the power from 25 April to 25 October 2026. The regulations before the Committee extend that time limit again, from 25 October to 25 April 2027, so that the policy can continue without interruption.

Graham Stuart (Beverley and Holderness) (Con)Can the Minister confirm whether the Government’s intent is to maintain this—albeit on a six-month rolling basis—for the entirety of this Parliament?

Ms BillingtonTo be clear, we will do this while we need to. As soon as parliamentary time allows, we will change the law so that we do not need to continue to extend in this way.

The regulations do not give the Secretary of State any new powers. They simply extend the period in which the existing power may be used. I assure hon. Members that the Department is working on primary legislation to provide a more permanent solution when parliamentary time allows.

The position is slightly different in Northern Ireland, where energy costs are a transferred matter for the Executive, and the Northern Ireland renewables obligation forms a smaller cost on energy bills. The Department has been supporting colleagues in Northern Ireland as they develop a comparable offer to the policy in Great Britain. Following a request from the Northern Ireland Minister for the Economy, separate regulations came into force on 20 June to enable the Northern Ireland Executive to deliver their comparable offer.

The regulations are a straightforward extension of an existing time-limited power. At a time when international events continue to put pressure on wholesale energy markets, it is vital that the Government can continue to deliver the bill reductions announced in the Budget while work progresses on a longer-term legislative solution. I commend the regulations to the Committee.

Lincoln Jopp (Spelthorne) (Con)Has the Minister assessed how much the additional six-month extension will cost the Exchequer?

Ms BillingtonI thank the hon. Gentleman for his question. I am happy to write him about the specifics of that.

Graham StuartIf I may further ask the Minister, I find it—

The ChairOrder. I think the Minister has concluded—has she?

Ms Billingtonindicated assent.

The ChairI call Bradley Thomas.

16:35:00

Bradley Thomas (Bromsgrove) (Con)It is a pleasure to serve under your chairmanship, Sir Desmond, and I congratulate the Minister on her appointment. The draft regulations extend the period during which the Government may exercise the existing powers under the Energy Prices Act 2022. Specifically, they extend the Secretary of State’s power to fund a proportion of the renewables obligation costs attributable to domestic electricity supply from 25 April 2026 until 25 October 2026.

No new powers are created through this instrument; it simply prolongs the exercise of powers that Parliament has already granted. The Minister has explained that the purpose of the extension is to support the Government’s policy of reducing domestic energy bills by transferring 75% of renewables obligation costs from consumers to the Exchequer, claiming that it will reduce household energy bills by an average of £150 from April 2026. However, the measure is solely another exercise by the Government in moving costs from one pocket to another. Households may pay less through their energy bills, but they are still expected to meet those costs through general taxation.

It is also worth reminding the House of what the subsidies are funding. The renewables obligation provides long-term support to renewable generators, with consumers now bearing the brunt of the cost. The Government are not, as they are claiming, tackling the underlying drivers of high energy prices; they are simply shifting the burden from energy bills on to the public finances. The Minister speaks of a commitment to lowering household energy bills by £300, yet household energy costs are now higher than when the Government entered office in 2024.

Graham StuartIs my hon. Friend as astonished as I am that the Minister—I know she is new to her post—has come here to propose a six-month extension of the movement of costs from bills to the Exchequer and cannot tell the Committee how much money that will cost? That is the most basic question a Minister would ask when drafting the instrument—hopefully refreshment has arrived for her and she will be able to tell us in due course. She cannot turn up to this House with a proposal like this and not know the basic money she is adding to the national debt. As I read this morning, which my hon. Friend may have seen, this comes at a time when we have record levels of costs on gilts—5.88%.

Bradley ThomasMy right hon. Friend is experienced in these matters. I would have thought that question would be in the 101 of presenting this instrument to the House.

We are pleased to see the Government finally adopt our Conservative party policy of abolishing the carbon price support on electricity generation, but their plan for the promised £300 savings is still nowhere to be found. While Labour transfers the cost of renewable subsidies on to taxpayers, the Conservative party has set out our cheap power plan to reduce the underlying cost of energy for households. That plan would abolish the renewables obligation altogether, accelerate the delivery of new nuclear power by cutting unnecessary planning barriers, remove VAT from domestic energy bills for three years and abolish the carbon tax. Together, those measures would reduce household bills by around £200—not simply move costs from one bill to another. Can the Minister outline what the Government’s plan for cheap power is, and if not, whether they are willing to accept ours as a solution? Finally, when, if ever, will households receive the £300 reduction in energy bills, as promised at the last general election?

16:39:00

Terry Jermy (South West Norfolk) (Lab)It is a pleasure to serve under your chairmanship, Sir Desmond. I do not wish to detain hon. Members for any longer than necessary, but it would be remiss of me not to mention the issue of heating oil, because more than 22,000 households in my constituency are reliant on it. Hon. Members may be aware that heating oil was never subject to the energy price cap. Over a number of years, we have seen huge price increases, which, in March this year, culminated in many households seeing a doubling or tripling of heating oil costs linked to the ongoing war in the middle east, specifically in Iran.

I am pleased to support the measures in the regulations, which add to the support that the Government gave in March: £53 million for heating oil customers specifically, £3.5 million of which went to the support offered by Norfolk county council. However, many residents have been reluctant to apply for that support because it is not universal. I am delighted to see the Minister in her place and encourage her to reiterate the Government’s commitment to those who rely on heating oil, and to outline what the Government are doing to support them.

16:40:00

Pippa Heylings (South Cambridgeshire) (LD)It is a pleasure to serve under your chairship, Sir Desmond, and I congratulate the Minister on her appointment. The extension of the Government’s powers to support energy costs will be welcome news for my South Cambridgeshire constituents and for people all over the country, who face continued pressure from high bills. We Liberal Democrats support this necessary extension but remain concerned that families and businesses are still far too exposed to global energy market shocks.

The latest tensions and the ongoing conflict in the middle east serve only to increase the volatility in energy markets, so the Government’s £150 reduction on energy bills was welcome. However, the increase in wholesale gas prices resulting from the closure of the strait of Hormuz and from the existing tensions between the US and Iran was the main reason for Ofgem’s recent 4% price cap rise, which meant that the average household now faces a further £60 a year in costs.

The extension enables the Government to continue to fund 75% of the renewables obligation with public spending through the Exchequer, rather than through energy bills. We have called for that for a long time. We urge the Minister to go further and to remove the entirety of the levy from people’s bills. The £150 reduction in bills also comes from the discontinuation of the energy company obligation scheme. At the time of that discontinuation, we warned that delays in detailing how the scheme will be replaced would mean many households once again facing cold, damp homes this winter. I know that is an issue of deep concern to the Minister, but it is deeply concerning that only 5,470 homes have been upgraded through the warm homes local grant—just 0.1% of the Government’s target of upgrading 5 million homes by 2030. With energy prices remaining so volatile, improving the energy efficiency of our homes is one of the best ways to reduce bills in the long term and to protect households from future shocks.

It is time to provide a progressive social energy tariff for those struggling with costs. It is time that we acknowledge energy as a basic human need. That is why we Liberal Democrats call for an essential energy guarantee to give every household a discount on the basic portion of their energy use. That would save a typical family around £100 a year, and save the 20% least well-off around £140. Although we support the extension and the Government’s action to reduce some of the costs on energy bills, much more needs to be done to bring bills down and to protect households from future energy price shocks.

16:43:00

Ms BillingtonI thank hon. Members for their contributions, and I will turn briefly to the points raised. The No. 1 priority of this Government is to tackle the cost of living crisis that people face. The Government acted at last year’s Budget by taking an average £150 of costs off energy bills. Those decisions are now factored into bills for the years to come. That decision was taken at the autumn Budget 2025 before the conflict in the middle east and the subsequent increase in wholesale energy prices. As a result, households are better protected from those increases than they would otherwise have been.

The rise in the price cap announced by Ofgem will be deeply concerning news for families. We will continue to monitor the situation ahead of the winter and plan for all contingencies. I recognise that some would like us to go further in immediately reducing bills in response to recent events. One of the first steps that the new Prime Minister took was to cut VAT on electricity bills. Without that intervention, the price cap figure would have been around £45 higher than announced. Although the price cap will increase by 4% on 1 October, driven by ongoing wholesale price volatility as a direct consequence of the events in the middle east, it would have been considerably higher still without the ongoing effects of moving the renewables obligation to the Exchequer, which continues to suppress bills.

Where impacts have been felt by those outside the energy price cap, we have acted, with £53 million of support via the crisis and resilience fund for vulnerable heating oil customers announced in March. I thank my hon. Friend the Member for South West Norfolk for his question about the crisis and resilience fund. I understand people’s concern about whether they should apply. I urge anyone who relies on heating oil who has any concerns about their ability to afford to keep their home warm this winter to apply to the fund, and I will be keen to ensure that local authorities recognise their responsibilities when it comes to disbursing funds accordingly.

Graham StuartThe Minister is being most generous in giving way. There was a clear manifesto promise to reduce energy bills by £300. Is that manifesto promise still extant? Is she intent on delivering it, and if so, how and when?

Ms BillingtonI thank the right hon. Gentleman for his intervention, and I am sure we will continue to have conversations about this. Our manifesto commitment is absolutely to make sure that we have lower energy bills in the future. We also have to be honest about how we manage external shocks to our system and make sure that we are protecting customers and consumers from those. That is one reason why we have the clean power plan, and why we are looking to reform the market over time so that we are not exposed to the kinds of global shocks that push up prices, as we have seen recently.

Graham StuartThe Minister is being most generous again. I did not ask her about protecting consumers from energy price shocks; I asked about a clear, unequivocal manifesto pledge to reduce household energy bills by £300. She, like her predecessors, refuses to address it directly. It was a clear promise. She and her colleagues were elected on the basis of delivering that, and this Government are not delivering it. They are delivering higher bills at a time when people are struggling with household finances. Those people demand and expect that Ministers in the Government account for that promise and tell us whether it will be delivered, and if so, how.

Ms BillingtonI thank the right hon. Gentleman for his intervention. It is very clear. As I said, we absolutely stand by our commitment. The previous Energy Secretary, my right hon. Friend the Member for Doncaster North (Ed Miliband), said:

“Bills are too high and we stand by our promise to get bills down by up to £300 by 2030.”

We have already taken £150 off bills as a consequence of the decisions made in the previous Budget. The new Prime Minister has announced a £45 reduction on average across an energy bill because of the reduction in VAT. The independent Resolution Foundation found that across 2026 as a whole, the typical energy bill is now expected to be more than £200 lower in real terms than in 2024 before the conflict in the middle east began.

I understand that the right hon. Member for Beverley and Holderness knows a lot about the energy system and I respect his understanding, but when there are global shocks like there are, we have to do everything we can as a Government to protect consumers from those global shocks. That includes the short term with the efforts we are putting in now, and the long term in reforming the market. I look forward to seeing him supporting our reform of that market in order to be able to protect consumers in the future.

The UK has a diverse and resilient energy system—indeed, one that the right hon. Gentleman oversaw for some time—and we will of course continue to monitor the situation in the middle east closely. I assure colleagues that contingency planning is taking place for every eventuality to ensure that the Government can be responsive and responsible. It is important to understand that we need a principled reform to shift the balance of levy costs from the bill to the Exchequer, because we need to make sure that that is a fairer way of dealing with the cost of a shift to a cleaner and more resilient energy system. The reason we have given for not abolishing the renewables obligation, which is a suggestion from the Conservatives, is that it would significantly impact on investor confidence and energy security. There is a risk of there being no certainty that 25,000 renewable energy projects would continue generating without that subsidy. I am sure that His Majesty’s Opposition would not want a set of policy proposals that would threaten the security of our energy system in that way.

The draft regulations extend a time limit on essential legal powers that will enable us to take action to reduce people’s energy bills. While simple in themselves, the regulations support the reduction of energy bills, which is a key part of the Government’s focus on the cost of living. Question put and agreed to.

16:50:00

Committee rose.